The American manufacturing sector expanded at its best pace in more than two years powered by a surge in new orders. Factory output has now risen at the fastest clip in four years since dipping into contraction in May and the expansion has promoted expectations for stronger economic growth in the second half of the year.
The Institute for Supply Management (ISM) purchasing managers index registered 55.7 in August up from the prior month's 55.4, for the highest reading since June 2011. Economists had predicted a score of 54.0.
The Dow was 17.54 points higher at 12:28 pm having been up as much as 123 points earlier. The dollar was near its intra-day high against the euro of 1.3139, supported by higher U.S. Treasury yields. The 10-year generic bond yield was nine basis points higher at 2.88%.
Automobile production and the housing construction helped propel manufacturing. New orders soared to 63.2 from 58.3, their best level in 28 months and its biggest one month gain since March 2010. The export index advanced to 55.5 from 53.5 and imports reached 58.0 from 57.5.
Production and employment lagged the generally upbeat report. Production in August fell to 62.4 from 65.0 and employment declined to 53.3 from 54.4.
In a separate report construction spending rose 0.6% in July, better than the 0.4% expected and the revised flat reading in June that had originally been reported at -0.6%.
Chief Market Strategist