The Chicago Business Barometer, also known as the Chicago PMI, or purchasing managers index, stayed at 58.9 in August. Indexes above 50 indicate expansion while anything lower indicates contraction.
Economists surveyed by The Wall Street Journal expected the gauge to come in at 58.
"Following a sharp rise in the barometer to a more-than-three-year high in June, it isn't too surprising to see activity subsequently ease somewhat," said Shaily Mittal, an economist at MNI Indicators. "The disappointment comes from the employment indicator which once again contracted, the sixth time in the last 12 months, with fewer firms expecting an increase in hiring."
The inventories indicator fell below 50 during the month, hitting the lowest level since the start of the year, as some companies struggled to keep up with demand.
While the majority of respondents said their inventory levels were just right and around a quarter said they had too much, 16% said they had too little. This is a significant increase from the 2% who reported limited inventory when the same question was posed in November 2015.