Business activity in the U.S. unexpectedly expanded at a faster pace in June as orders and production picked up, signaling manufacturing will keep driving growth in the world's largest economy.

The Institute for Supply Management-Chicago Inc. said today its business barometer climbed to 61.1 this month from 56.6 in May. Economists called for the index to drop to 54, according to the median forecast in a Bloomberg News survey. Figures greater than 50 signal expansion.

The data are at odds with regional factory reports from Philadelphia and New York that showed Japan's earthquake-related supply shortages continue to work their way through the economy. Federal Reserve policy makers view the recent slackening in the expansion as temporary, signaling growth will pick up by yearend at the same time overseas demand benefits companies like Illinois Tool Works Inc.