Business activity in the U.S. Midwest grew more than expected this month, helped by a jump in new orders, a report showed on Thursday.

The Institute for Supply Management-Chicago's business barometer rose to 61.1 in June, above the 56.6 in May and economists' expectations for a drop to 54.

The unexpectedly strong reading suggests that manufacturing, a driver of the recovery that has recently appeared to be faltering, may be gearing up again. Other regional manufacturing surveys had suggested a continuing slowdown.

The really good news is that orders jumped back up in the Chicago survey, said Pierre Ellis, a senior economist at Decision Economics in New York. The case for a weakening at the national level is now less strong.

New orders surged, to 61.2, from 53.5. A reading above 50 indicates expansion in the regional economy.

Auto production, a mainstay of the region that was hard hit by supply disruptions after the earthquake and tsunami in Japan, is likely a key driver, said David Sloan, an economist at IFR, a Thomson Reuters unit.

Still, the survey showed hiring may not be keeping pace with improvements in output.

The employment component of the index slipped to 58.7 from 60.8 in May, its lowest reading since December.

(Reporting by Ann Saphir; Editing by Padraic Cassidy)

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