WASHINGTON – U.S. manufacturing activity heated up in July in the second straight month of growth, according to a monthly survey released Thursday.

The Institute for Supply Management said its purchasing managers index for the manufacturing sector jumped to 55.4 in July, a solid 4.5 percentage points higher than the June figure. The PMI reading was well above the average analyst prediction of 51.5 and the strongest level of the year.

The PMI index has been above 50 -- expansion territory -- every month except May, when it dipped to 49.0. A reading below 50 indicates a contraction.

Based on a survey of 18 manufacturing industries, the July PMI index showed a powerful 11.6 point increase in production.

New orders, pointing to further growth, rose 6.4 points to 58.3.

Employment in manufacturing rebounded from a two-month contraction, gaining 5.7 points at 54.4.

Inventories and prices, however, fell into contraction territory.

“The July report is particularly comforting because the future direction for manufacturing activity had been uncertain while the overall economy struggled to achieve very modest growth in the first half, “ said Daniel Meckstroth, chief economist for the Manufacturers Alliance for Productivity and Innovation (MAPI).  

“A surge in production and new orders in July, as indicated in the report, gives growth momentum to the sector and confirms our forecast of an acceleration in manufacturing activity in the second half of 2013,” he added. “Firms are taking advantage of ultralow interest rates (while they last) and investing in business equipment. There remains pent-up demand for housing and motor vehicles, driving manufacturing growth. In addition, private transportation infrastructure (railroad, trucks, aerospace) is seeing new investment. 

“The outlook is not all good news, however; the trade balance is worse, with imports growing faster than exports, and government austerity and the tax increases will keep a relatively low ceiling on the pace of growth,” Meckstroth concluded.

Copyright Agence France-Presse, 2013, IW Staff