An indicator of activity in the manufacturing-heavy U.S. Midwest rose into positive territory in July, following two months of signaling contraction.
The Chicago Business Barometer, also known as the Chicago PMI, climbed to 54.7 in July from 49.4 in June, starting the new quarter above the level of 50 that divides expansion from contraction.
July's rise was led by big jumps in the production and new orders components, which grew at the fastest pace since the beginning of the year. All of the index components rose, but order backlogs, supplier deliveries and employment remained in contraction.
Companies reported that wage growth was pegged at a low level, with 40% of respondents surveyed on the question saying wages had grown 1%-2% over the past year and nearly a quarter responding that wage growth was unchanged over the year.
Philip Uglow, chief economist of MNI Indicators which helps produce the index, said on Friday that while the PMI's recent weakness had "sounded a few alarm bells" about the strength of the U.S. economic recovery, "The positive start to the third quarter, however, suggests that activity bounced back firmly as firms saw orders and output increase sharply."
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