Manufacturing index hits 2-year high

MarketWatchSeptember 4, 2013 

WASHINGTON -- U.S. manufacturers expanded in August at the fastest pace in more than two years, a survey showed Tuesday, adding to growing evidence that the global economy may be starting to pick up.

The Institute for Supply Management's index edged up to 55.7 percent from55.4 percent in July, marking the highest reading since June 2011. Economists polled by MarketWatch had expected the index to drop to 54.1 percent.

Any number above 50 percent signals expansion, so the latest reading suggests manufacturers are growing at a more rapid clip compared to earlier in the year.

A similar index released Tuesday, known as Markit PMI, also showed that manufacturers were growing at a solid pace in August.

The increase in theISM dovetails with indexes showing an acceleration in manufacturing in the European Union, China and other large economies.

These indexes are compiled from surveys of executives who order raw materials and other supplies for their companies. They tend to rise or fall in tandem with the health of the economy.

Yet companies remain cautious despite the apparent upturn in global manufacturing conditions. Several executives polled by the ISM said business was steady but not as strong as they had hoped when the year began.

"Comments from the panel range from slow to improving business conditions, depending upon the industry," said Bradley Holcomb, chairman of the ISM survey committee.

The ISM's new-orders gauge posted the biggest increase, surging to 63.2 percent from 58.3 percent. That's the highest level since April 2011.

The production index, however, slipped 2.6 percentage points to a still-high 62.4 percent.

The employment gauge, a measure of hiring intentions, slid 1.1 points to 53.3 percent.

Perhaps a bit worrisome, the prices paid index jumped 5 points to 54 percent, marking the highest level since March.

That means companiesare paying more for materials, which could reduceprofits or curb hiring plans.

Fifteen of the 18 U.S. manufacturing industries surveyed by ISM reported growth in August. That's up from 13 in July.

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