Business activity in the U.S. expanded more than forecast in December, a sign American manufacturing is weathering the slowdown in Europe.

The Institute for Supply Management-Chicago Inc. said today its business barometer decreased to 62.5 from 62.6 in November. Readings above 50 signal growth. Economists forecast the gauge would fall to 61, according to the median of 49 estimates in a Bloomberg survey. Projections ranged from 59 to 65.

Gains in car sales and holiday spending on other goods and services at a time when companies are holding lean inventories may pave the way for stronger factory orders. Nonetheless, the risk of a recession in Europe fueled by its debt crisis and slower growth in emerging markets threaten to cool exports.

“Momentum in the U.S. economy remains solid, despite the deteriorating situation in Europe,” Brian Bethune, president of Alpha Economic Foresights in Amherst, Massachusetts, said before the report. “The manufacturing sector remains solid, propelled by fairly solid gains in domestic sales. Exports of capital goods are also holding up well.”