RTTNews - Activity in the Chicago-area manufacturing sector unexpectedly reached neutral territory in August following ten consecutive months of contraction, according to a report released by the Institute for Supply Management - Chicago on Monday.

The ISM - Chicago said its index of manufacturing activity rose to 50.0 in August from 43.4 in July, with a reading of 50 acting as the breakeven point versus contraction and expansion. Economists had been expecting a more modest increase to a reading of 48.0.

Commenting on the data, the ISM - Chicago said, The August Chicago Business Barometer reached equilibrium as the number of businesses contracting equaled the number of businesses expanding.

However, we won't know the recession is over for a number of months, the ISM - Chicago added.

The improvement in the sector reflected a turnaround in both production and new orders, with the production index jumping to 52.9 in August from 43.3 in July and the new orders index rising to 52.5 from 48.0 in the previous month.

At the same time, the report showed a continued contraction in employment. While the employment index rose to 38.7 in August from 35.3 in July, it remained below the key 50 level.

Inventories also continued to contract, although the inventories index edged up to 27.5 in August from 25.4 in the previous month.

On the inflation front, the report showed that the prices paid index jumped to 50.0 in August from 35.0 in July, indicating that prices were unchanged following several months of contraction.

Tuesday morning, the Institute for Supply Management is expected to release its national report on manufacturing activity in the month of August. The index of activity in the sector is expected to rise to 50.2 in August from 48.9 in July.

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