The Chicago Purchasing Managers' Business Barometer rose to 53.7 in July from 52.9 in June, the National Association of Purchasing Management-Chicago said Tuesday.
The data is compiled on a seasonally adjusted basis. An index reading below 50 signals a slowing economy, while a level above 50 suggests expansion.
Economists polled by Thomson Reuters predicted a 52.5 reading for the indicator.
The production index slumped to 54.5 from 57.0, the new orders index increased to 52.9 from 51.9, the order backlogs jumped to 52.8 from 42.2 in the prior survey and inventories fell to 52.6 from 53.5. The employment index declined to 53.3 from 60.4; and the supplier deliveries index was at 53.3, down from 54.2 last month. The prices paid index rose to 54.7 from 54.0.