NEW YORK ( TheStreet) -- The barometer of business activity in Chicago improved to its highest level in more than 20 years, according to the Institute for Supply Management Chicago.

Economic activity increased for the sixteenth consecutive month, with the Chicago Business Barometer Index rising to 68.8 in January from 66.8 in December on a seasonally adjusted basis. A reading over 50 indicates expansion.

The Chicago report surprised economists who were expecting the index to drop to 65, according to consensus estimates from Briefing.com.

On Tuesday, the Institute for Supply Management will release the national ISM report. The national index is expected to be relatively unchanged at 58.2.

According to Briefing.com, the Chicago PMI report enjoys the strongest correlation with the national ISM report, meaning it is a reasonably strong predictor of the ISM data.

The Production Index improved to 73.7 from 72.2, while new orders rose to 75.7 from 71.3. The barometer of production along with new orders rose to its highest level since 2004.

The Employment Index also showed a marked improvement, rising from 58.4 to 64.1.

The SPDR Industrials ETF ( XLI) was rising 0.6% in Monday morning trading.

--Written by Shanthi Bharatwaj in New York

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