The pace of business activity in the Midwest picked up modestly in July, although growth in new orders and employment both cooled, a report showed on Wednesday.

The Institute for Supply Management-Chicago business barometer rose to 52.3 from 51.6, though it fell short of economists' expectations for an increase to 54.

A reading above 50 indicates expansion in the regional economy.

The gauge of new orders slipped to 53.9 from 54.6, while the employment component fell to 56.6 from 57.8. Inventories also tumbled to 37.7 from 41.4.