By Xavier Fontdegloria

Business activity in the Chicago area slowed in February compared with January, data from MNI Indicators showed Friday.

The Chicago Business Barometer stood at 59.5 in February, down from 63.8 in January. Economists polled by The Wall Street Journal expected the index to come in at 61. The downtick comes after a sharp increase in the previous month, when the indicator rose to a two and a half year high.

The barometer is compiled every month after surveying purchasing and supply management professionals in the Chicago area, who are polled to assess business conditions for their respective companies. Readings above 50 point to expansion of business activity in the region, while readings below 50 indicate contraction. The indicator has been in expansion territory since July last year.

Among the main five indicators that form the barometer, new orders saw the largest monthly decline, followed by production, while employment recorded gains, MNI said.

Demand eased markedly in February with new orders dropping 11 points, its lowest level

since August 2020. Similarly, production shed 9.3 points, following two consecutive months of gains.

"Anecdotal evidence provides a mixed picture, with some firms experiencing a downturn due to the pandemic, while others report strong consumer demand," the report said.

Order Backlogs edged higher for the fourth successive month to the highest level since October 2017, while inventories declined 4.6 points but remained in expansion territory.

Supplier deliveries inched up 1.6 points, its highest level since May and recorded the third highest reading since the start of the pandemic.

Employment rose 5.7 points to a 16-month high. The index has been in contraction territory since July 2019.

Prices paid at the factory gate edged marginally higher, up 0.1 points, reaching the highest level since September 2018.

To the question of how did respondents cope with disruption in 2020, more than 40% said they increased their safety stocks, while almost 23% either implemented new technology or diversified suppliers.

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com

(END) Dow Jones Newswires

February 26, 2021 10:18 ET (15:18 GMT)

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