The index, which covers business conditions in the industrial belt of Indiana, Illinois and Michigan, rose by 5.6 points to 55.6 with production and new orders reaching 10-month highs and the employment index at a seven-month high.
The production index rose from 52.4 in December to 60.9. The new orders index jumped from 50.4 to 58.2. The employment index, marking the number of employees, rose from 46.8, which indicated contraction, to 58, which indicates growth.
The index uses 50 as the dividing point between contraction and expansion.
The report, which is produced by the Institute of Supply Management-Chicago Inc. and Deutsche Borse AG, noted a gain in the inventory index from 48.7 to 55. Nationally, a sharp drop in business inventories contributed to the fourth quarter gross domestic product decline, the Commerce Department said this week.
In the region covered by the Chicago ISM report, the inventory index stood at 49.8 in October, 47.8 in November and 48.7 in December.