There is some bad news from America's heartland.
Economic activity in the Midwest unexpectedly contracted in February, according to Institute for Supply Management's latest Chicago Purchasing Managers Index.
This report is somewhat out of touch with recent economic data, which has been modestly disappointing but still suggests the economy is growing at a measured pace.
In its report, ISM said the West Coast port strike and harsh winter weather most likely had a negative impact on manufacturing in February, though it was difficult to gauge the magnitude.
"It's too early to conclude that February represents a change in the relatively strong trend seen recently," the report said. "Nonetheless, the weakness in the Barometer points to softer GDP growth over the first quarter than previously expected."
The Chicago PMI came in at 45.8, indicating contraction in the manufacturing sector in the Midwest for the first time since April 2013.
This is the lowest reading for the index since July 2009.
Any reading over 50.0 indicates expansion, while readings under 50.0 indicate contraction.
Expectations were for the report to come in at 58.0, down from 59.4 last month but still indicating solid growth in the manufacturing sector in the Midwest. This report out of the Midwest also comes after the second estimate on fourth-quarter GDP showed that the US economy grew at an annualized rate of 2.2% in the final quarter of 2014.
Additionally, reports Friday morning showed that pending home sales were at an 18-month high, while consumer confidence — bolstered by the decline in gas prices — was at an eight-year high.
ISM said the sharp fall in business activity in February came as production, new orders, order backlogs, and employment all suffered double-digit losses, leaving them below the level that separates contraction from expansion.
Commenting on the Chicago Report, Philip Uglow, chief economist of MNI Indicators, said: "It's difficult to reconcile the very sharp drop in the Barometer with the recent firm tone of the survey. There's some evidence to point to special factors such as the port strike and the weather, although we'll need to see the March data to get a better picture of underlying growth."
In a note to clients following the report, Ian Shepherdson at Pantheon Macro said this decline was probably due to the harsh weather in the Midwest, but he added that it was "worth pointing out that during the polar vortex event last year, the Chicago PMI was little changed."
This chart shows the sharp drop in the Chicago PMI report.
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