Manufacturing conditions improved in May and expectations about future business in the industry rose to the highest level since late 2005, the Philadelphia Federal Reserve Bank said today.

The bank's survey is one of the first monthly reports for the manufacturing sector nationwide and is closely followed by economists.

It was the strongest reading on the Philadelphia-area manufacturing sector in five months, with 30 percent of companies reporting increasing activity and 26 percent reporting decreasing activity, according to the survey. The balance of the firms reported no changes.