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Manufacturing growth unexpectedly picks up in August, ISM says

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WASHINGTON -- Growth in the key manufacturing sector unexpectedly picked up last month from an already strong pace as factories saw a surge in new orders, the Institute for Supply Management said Tuesday.

The group's purchasing managers' index, which is closely followed by economists, rose to 55.7 in August, from 55.4 the previous month.

The July figure was the best since early 2011, and analysts had expected the pace of growth to drop last month to 54. A reading above 50 indicates that the sector is expanding.

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August was the third straight month of growth after the sector contracted slightly in May, and indicates that the economic recovery is accelerating in the second half of the year.

Federal Reserve officials are closely watching economic data as they consider reducing the central bank's stimulus efforts. Fed policymakers could start tapering their $85 billion in monthly bond purchases this month.

The improvement at manufacturing businesses in August was driven by a jump in new orders, an important sign of future activity.

ISM's new orders index rose to 63.2, the highest level since April 2011. The index was at 58.3 in July.

But in a worrisome sign for Friday's government jobs report, ISM's employment index for the manufacturing sector dropped to 53.3 in August. That was down from 54.4 in July.

Analysts expect the Labor Department to report that the economy added 180,000 net new jobs in August, up from 162,000 the previous month.

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