By Burton Frierson

NEW YORK (Reuters) - Key regions of the United States remained mired in recessionary conditions this month, data on Monday showed, as the slowdown in the world's largest economy wore on and inflation continued to hurt businesses.

Business activity declined in New York city, according to the National Association of Purchasing Management-New York, as the ongoing credit crisis hamstrung the nation's financial capital.

Separate reports also showed business activity in the Milwaukee region contracted in March while manufacturing activity in Texas retrenched.

Business activity in the factory-heavy U.S. Midwest also contracted in March for the second month running, while a price component rose, according to a report that highlighted worries of recession and inflation.

The National Association of Purchasing Management-Chicago business barometer rose to 48.2 from 44.5 in February, but remained below the 50 level that separates contraction from expansion.

"This report has a strong stagflationary feel to it with activity continuing to contract, but with prices pressures intensifying," analysts at Bear Stearns said in a note on the Chicago report.

Still, the Chicago index figure was better than the 46.0 foreseen in a Reuters poll, and Wall Street took an optimistic view of the data. Stocks rose, while the dollar edged up against the yen and held steady against the euro.

U.S. government bonds, which generally benefit from signs of a weakening economy, pared earlier gains after the Chicago data, but were still in positive territory on the day.