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Chicago Manufacturing Index Rose to Seven-Month High in May (1)

May 30 (Bloomberg) -- Business activity in the Chicago area unexpectedly increased to a seven-month high in May as orders accelerated, a sign manufacturing will help provide a boost to the economy.

The Institute for Supply Management-Chicago Inc.’s business barometer rose to 65.5 this month from 63 in April. The median forecast of 46 economists in a Bloomberg survey projected the index would fall to 61. Readings greater than 50 signal growth.

Gains in manufacturing, which makes up about 12 percent of the economy, have been supported by rising demand for durable goods such as automobiles, appliances and machinery. Faster improvement in the labor market will be needed to generate more wage growth and boost consumer purchases, which will in turn create more orders for factories.

While orders climbed, production and factory employment expanded at slower paces this month.

Economists’ projections for the Chicago business barometer ranged from 58 to 65. The national factory index, which is produced by the Tempe, Arizona-based Institute for Supply Management, probably increased to 55.5 in May from 54.9 the prior month, according to the median estimate in a Bloomberg survey. That report is due June 2.

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