The Chicago Purchasing Managers' Business Barometer rose to 68.6 in December from 62.5 in November, the National Association of Purchasing Management-Chicago said Thursday.
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 61.0 reading for the indicator.
The production index rose to 74.0 from 71.3, its highest level since October 2004, the new orders index increased to 73.6 from 67.2, the order backlogs index surged to 64.6, its best level since July 1988, from 48.9 in the prior survey and inventories soared to 60.1 from 48.4. The employment index increased to 60.2 from 56.3; and the supplier deliveries index was at 64.2, up from 60.4 last month. The prices paid index grew to 78.2, its highest point since July 2008, from 70.7.