CHICAGO, July 31 (Xinhua) -- The Chicago Purchasing Managers Index (PMI), or Chicago Business Barometer, rose 1.4 points to 65.5 in July, hitting the highest since January, according to the Institute for Supply Management Chicago.

The Chicago PMI is considered to be a leading indicator of the U.S. economy. It is made up of the production, new orders, order backlogs, employment and supplier deliveries indicators and is designed to predict future changes in U.S. gross domestic product.

An indicator reading above 50 indicates expansion compared with a month earlier while below 50 indicates contraction. A result of 50 is neutral.

Business activity accelerated in July, with growth in firms' business operations up for the fourth time this year. All but one of the Barometer components rose on the month, with only supplier deliveries losing ground, leaving the Barometer up 10.1 percent on the year.

To be specific, the barometer's gain was largely driven by an acceleration in both new orders and production. Both indicators recorded six-month highs in July, up 8 percent and 1.6 percent on the year respectively.

The order backlogs indicator capped a third straight rise by hitting a nine-month high, with some firms reporting a demand hangover from June while others blamed inefficiencies in production and a lack of employees.

The employment indicator rose for the third consecutive month in July, settling at a four-month high. Despite this, however, there were still reports of firms struggling to source ideal candidates, which continues to hamper recruitment plans.

"The Chicago Business Barometer started the third quarter in bullish form, with business activity supported by robust demand and output. Both, like the headline index, registered 6-month highs and the majority of firms expect demand to increase further over Q3," said Jamie Satchi, Economist at MNI Indicators.

"Input prices continue to be a thorn in the side of businesses, however, with the prices paid indicator at the highest in a decade and continuing to signal pipeline inflation," he added. Enditem