U.S. Midwest business activity contracted sharply in February in a report showing even the
areas of the country least affected by the boom-bust housing cycle are feeling ripples from the crisis.
The National Association of Purchasing Managers-Chicago said on Friday its index of regional business conditions tumbled to 44.5, its lowest since December 2001, from 51.5 in January. That was well below forecasts centering around 49.7.
The data bolstered the view that the economy is heading for a recession, since manufacturing had been one of the few holdouts in an otherwise grim economic picture.
"Over the last three to four weeks, there have been a string of economic releases that were dramatically weaker than expected," said John Canavan, a market analyst at Stone and
McCarthy Associates. "The implications are quite negative for the economy."
Consumer spending has been retreating steadily, leading to a near-stagnation of the economy in the fourth quarter. The anemic activity is expected to linger, with Federal Reserve
Chairman Ben Bernanke noting this week that the risks to softer growth were tilted to the downside.
Some economists believe that a rapid deterioration in the data suggests the recession is already here.
The Chicago-PMI figures troubled an already nervous stock market, sending the Dow Jones industrial average down nearly 180 points, or 1.4 percent. Bond prices rallied.
"The manufacturing sector has formally toppled into recession and likely signals an economy-wide recession," said Richard Iley, senior economist BNP Paribas.