The pace of business activity in the U.S. Midwest slowed in August to the slowest since November 2009, a report showed Wednesday.

The Institute for Supply Management-Chicago business barometer dropped to 56.5 from 58.8 the month before. Still, it was better than economists' forecasts for a reading of 53.5, according to a Reuters poll.

The employment component of the index improved a hair to 52.1 from 51.5, while new orders slipped to 56.9 from 59.4.

A reading above 50 indicates expansion in the regional economy. Investors will get a look at the larger national manufacturing report from the Institute for Supply Management later in the week.

"This is a good number, but yesterday consumer confidence was the worst in two years," said Joe Donohue, money manager at Dimension Trading.

"You have to take the good with the bad, but I remain in the double dip camp, I think GDP is horrendous. I don't think our growth rate isn't going to get us anywhere. The only difference lately is that the market takes bad news pretty well, which is a short-term bullish sign."