Business activity in the Midwest is fell in January, with the Chicago Purchasing Manager's dropping to 50.3 from a downwardly revised 53.9.
Tuesday's reading was the lowest in 11 months and has the index teetering on the edge of contraction (any print below 50 represents contraction).
"Three of the five components of the Barometer decreased, with only Order Backlogs and Supplier Deliveries recording gains in January," the report said.
Firms were asked what they expected would be the impact of Fed rate hikes in 2017 and nearly 9 out of every 10 respondents didn't think there would be much of an impact.
"Respondents to our survey did not expect to be affected by rate increases by the Fed in 2017. Although cost of capital is expected to increase, firms seemed to have already factored this into their purchase decisions." Shaily Mittal, senior economist at MNI Indicators, said in the report.