Business activity in the U.S. Midwest contracted in June for a fifth straight month but at a less severe rate, even as production and new orders both slipped, a report showed Monday.
The National Association of Purchasing Management-Chicago business barometer rose to 49.6 from 49.1 in May, and was the strongest since January.
Economists had forecast the index at 48.0. A reading below 50 indicates contraction.
"The fact that we are hanging around 50 is consistent with an economy that is hovering right above recession level, but is not in a recession," said Mark Vitner, economist at Wachovia Securities in Charlotte, North Carolina.
The employment component of the index rose to 46.7 from 41.2 in May -- also the strongest since January.
Still, new orders fell to 52.0 from 56.1 and production was down to 45.1 from 51.5.
"On balance, results came in relatively mixed, contributing to a modest further increase in the headline measure," said strategists at IDEAglobal in New York. "Most subcomponents remain weak."
Businesses face continued high input costs. The prices paid index slipped to 85.5 from 87.5, which was the highest since June 2006, and was above 80 for a fourth straight month.
Many analysts consider the NAPM-Chicago survey a factory report since the region is relatively industrialized, although service sector companies and nonprofits are polled too.
"It looks as if manufacturing in the Midwest is holding its own. The orders index was down a little bit, but still above 50 so it looks as if things aren't getting a lot better, but are stable at this point," said Gary Thayer, senior economist at Wachovia Securities in St. Louis.
The barometer measures activity by companies based in the Chicago area, even if they have operations elsewhere.
U.S. stocks briefly ticked higher on the news, which some interpreted as a sign that the economy, while weak, is not falling into a deep recession. Treasury debt markets were marginally weaker.