Business activity in the U.S. Midwest failed to return to growth in September as expected, and instead got slammed by a decline in production and new orders, a report showed on Wednesday.

The Institute for Supply Management-Chicago business barometer fell to 46.1 in September from 50.0 in August.

Economists had forecast the index at 52.0. A reading above 50 indicates expansion in the regional economy.

Don't know why it looks so weak, when at least anecdotally we've been hearing that September was a good month economically, and a pickup from August, said Tim Ghriskey, chief investment officer at Solaris Asset Management in Bedford Hills, New York.

New orders and production, which both surged in August, fell back sharply. New orders dropped to 46.3 from 52.5 and production dropped to 47.2 from 52.9 a month ago.

The new orders component was especially disappointing. Everything else will eventually follow orders and that was the weakest area of the report, said Michael Moran, chief economist at Daiwa Securities in New York.

The employment component of the index inched up to 38.8 in September from 38.7 in August. Prices paid rose to 51.3 from 50.0.

The ISM-Chicago index is often regarded as a factory index because the region is relatively industrialized. But service-sector and nonprofit forms are polled as well.

U.S. equity prices slipped on the report, which hinted that the U.S. economic recovery could be more choppy than some pundits have assumed.

This is a further warning shot that even a modest recovery will not be smooth sailing and is going to reinforce the equity slippage today, said Alan Ruskin, chief international strategist at RBS Global Banking and Markets in Stamford, Connecticut.

(Reporting by Ros Krasny; Editing by James Dalgleish).