Midwest Business Expands More Than Expected

Business activity in the U.S. Midwest expanded more than expected, to the highest level since April 2005, a report showed on Friday.

The Institute for Supply Management-Chicago business barometer rose to 62.6 from 61.5 in January.

Economists forecast the index at 60. A reading above 50 indicates expansion in the regional economy.

"The data confirms that manufacturing remains the source of our incipient recovery," said Peter Boockvar, an equity strategist for Miller Tabak & Co. in New York.

Market reaction in both stocks and bonds was muted, as key components of the index dropped.

The employment component of the index fell to 53 in February from 59.8 in January. New orders fell to 62.2 from 66.4 in the previous month.

Helping the index was an increase in prices paid to 67.7, the highest since September 2008, from 66.2 the previous month.