Business activity in the U.S. expanded in July at a faster pace than projected, signaling manufacturing is driving growth in the world’s largest economy. The Institute for Supply Management-Chicago Inc. said today its business barometer rose to 62.3 this month, exceeding the median forecast of economists surveyed by Bloomberg News, after 59.1 in June. Figures greater than 50 signal expansion. Rising demand in developing countries is lifting factory output and causing manufacturers like Caterpillar Inc. to raise earnings forecasts. The report may help reduce concern an easing in consumer spending would lead to a broader economic slowdown. “We expect manufacturing to keep growing,” Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, said before the report. “Demand is still there, and exports are doing fairly well. As employment recovers, it will fuel further gains in manufacturing and in the economy.” A Commerce Department report today showed growth slowed to a 2.4 percent annual rate in the second quarter, less than forecast, reflecting a larger trade deficit and an easing in consumer spending. The increase in gross domestic product compared with a median forecast of 2.6 percent of economists surveyed by Bloomberg News and follows an upwardly revised 3.7 percent pace in the first quarter that showed a jump in inventories, according to the report. Business investment climbed at the fastest rate since 1997. Economists forecast the Chicago group’s gauge would fall to 56, according to the median of 53 survey projections. Estimates ranged from 50 to 60.

Source