WASHINGTON -- Factories heated up last month as the manufacturing sector expanded at its fastest pace in two years, the Institute for Supply Management said Thursday.
The group's purchasing managers index jumped to 55.4 in July from 50.9 the previous month. It was the second-straight month of improvement after the index fell to to 49.9 in May, a four-year low that indicated the crucial economic sector had contracted.
A reading above 50 indicates that manufacturing businesses are expanding.
The July figure exceeded analyst expectations for a more modest rise and was the highest since June 2011.
The index gained in all its major categories last month.
The employment figure, a gauge of industry hiring, rebounded into expansion territory at 54.4 after dropping to 48.7 in June. July's reading was the strongest since June 2012.
The production index soared to 65, its highest level since 2004.
The new orders index, a read on future activity, also jumped significantly to 58.3, a more than two-year high.
Of the 18 industries the index tracks, 13 reported growth in July, including transportation equipment and computers and electronics. Four reported contracting in July, including the apparel industry.
The strong ISM report comes after other positive economic data in recent days, particularly the goverment's report that the economy expanded at a 1.7% annualized rate in the second quarter.
Though still weak, the growth rate was better than anticipated in the face of this year's tax increases and federal spending cuts.