Midwest Manufacturing Jumps Out of Contraction in March

Midwest business activity picked up in March as firms amped up production and hiring, more evidence that pressures hurting U.S. producers may be dissipating.

The Chicago Business Barometer, also known as the Chicago PMI, climbed to 53.6 from 47.6 in February. The 50 mark is the threshold between expansion and contraction.

Economists surveyed by The Wall Street Journal expected a rise in the index to 50.0.

Sharp bounces in production and employment pulled the index higher this month. Producers reported an upturn in demand and expressed optimism that orders would continue to rise over the next three months.

As demand resurfaced and sentiment improved, firms across the region increased hiring. The survey's employment gauge rose back above the 50 mark to the highest level in nearly a year, breaking what had been a trend of weak hiring in the region.

The Chicago PMI is the last in a batch of regional surveys looked to by traders and economists for clues on the state of the national manufacturing sector. Reports this month have shown marked improvement across the country as a break in the dollar's climb has helped exporters, though manufacturers most exposed to the price of oil are still struggling. Unlike other regional purchasing managers' reports, the Chicago-area survey includes some firms from the much bigger service-sector, where more favorable conditions have offset manufacturing weakness.

The Chicago survey is known to be a volatile one. "Looking through some of the recent volatility, the data are consistent with steady, not spectacular, economic growth in the U.S.," said Philip Uglow, chief economist of MNI Indicators, the compiler of the report.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com