The Chicago Purchasing Managers Index (PMI) -- one of the precursors to the ISM reports that will be released tomorrow (manufacturing) and next week (services) -- fell to 46.1% in September from 50.0% in August. The report covers both manufacturing and service businesses. The magic number separating expansion from contraction is 50.0%. The Chicago report is a big disappointment after similar readings from the New York and Philadelphia regions showed unexpected improvements. The consensus expectation was that the Chicago reading would come in at 52.0%. This puts the current expectations that the ISM manufacturing number will come in at 54.0 in substantial doubt. In August the reading was 52.9, and that was a key piece of evidence that the economy was on the mend. I did not see what the expectations are for the services number, and lately manufacturing has been doing better than services. If ...

Even as investors get more and more bullish about the outlook for the U.S. economy, the economy’s underlying foundation continues to erode.

In a report to be released this week, the Obama administration will boost its 10-year projection for the federal budget deficit to about $9 trillion – an increase of roughly $2 trillion, or 29%, from its prior projection, Fox News reported over the weekend, citing a source from the Office of Management and Budget (OMB).

The new cumulative deficit projection – for 2010-2019 – replaces the administration’s previous estimate of $7.108 trillion. Changes in budget projections – whether they result in a surplus or a deficit – are often refined as economic conditions change. This new projection was necessary because the recession has gone on for so long, causing federal tax receipts to plunge – and because the economic rebound will be prolonged and weak, resulting

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