Updated March 27 at 6:35pm

Manufacturing in U.S. expands at a faster pace than forecast

Manufacturing in the United States expanded more than forecast in August to the fastest pace since June 2011, a sign the sector will contribute more to the expansion in the second half of the year. More

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Manufacturing in U.S. expands at a faster pace than forecast

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WASHINGTON - Manufacturing in the United States expanded more than forecast in August to the fastest pace since June 2011, a sign the sector will contribute more to the expansion in the second half of the year.

The Institute for Supply Management’s factory index climbed to 55.7 from the prior month’s 55.4, the Tempe, Ariz.-based group’s report showed Tuesday. Fifty is the dividing line between growth and contraction. The median forecast of 85 economists surveyed by Bloomberg called for 54.

Factory activity is getting a boost from demand for automobiles, which is encouraging manufacturers such as Ford Motor Co. to expand capacity. The rebound in residential construction also is helping support orders and production, which may get a further lift as overseas markets stabilize.

“It’s going to be a solid quarter for U.S. manufacturing,” said Brian Jones, senior economist in New York at Societe Generale, who projected a reading of 55.8. “Businesses are expanding production not only to meet demand but to also build inventories. Foreign demand may be picking up.”

Stocks held gains after the figures, with the Standard & Poor’s 500 Index climbing 1 percent to 1,648.74 at 10:48 a.m. in New York.

Estimates from economists in the Bloomberg survey ranged from 51 to 55.8. Manufacturing accounts for about 12 percent of the economy.

Another report showed construction spending increased in July to the highest level in four years. Outlays climbed 0.6 percent to a $900.8 billion annual rate, the strongest since June 2009, after little change in June, the Commerce Department said.

Orders increase

The ISM’s new orders measure advanced to 63.2, the highest since April 2011, from 58.3, and the gauge of export demand advanced to a five-month high of 55.5 from 53.5.

The production index decreased to 62.4 from 65 the prior month.

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