After reporting the biggest monthly jump in manufacturing activity in seventeen years in the previous month, the Institute for Supply Management released a report on Tuesday showing that manufacturing activity expanded at an even faster rate in August.
The ISM said its purchasing managers index edged up to 55.7 in August from 55.4 in July, with a reading above 50 indicating an increase in manufacturing activity.
The modest increase by the purchasing managers index came as a surprise to economists, who had expected the index to dip to a reading of 53.8.
With the unexpected increase, the index added to the 4.5-point gain posted in the previous month, reaching its highest level since hitting 55.8 in June of 2011.
Bradley J. Holcomb, chair of the ISM Manufacturing Business Survey Committee, said, "August's PMI reading, the highest of the year, indicates expansion in the manufacturing sector for the third consecutive month."
"Comments from the panel range from slow to improving business conditions depending upon the industry," he added.
The modest increase by headline index was partly due to a notable acceleration in the pace of new orders growth, with the new orders index jumping to 63.2 in August from 58.3 in July.
Meanwhile, the production index fell to 62.4 in August from 65.0 in July and the employment index dipped to 53.3 from 54.4, indicating slower growth.
The report also showed that the prices index surged up to 54.0 in August from 49.0 in July, suggesting that raw materials prices increased after contracting in the previous month.
Thursday morning, the ISM is due to release a separate report on activity in the service sector in the month of August.
Economists currently expect the ISM's index of service sector activity to dip to 55.0 in August from 56.0 in July, although a reading above 50 would indicate continued growth.
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