Helped by a surge in new orders, the nation's manufacturing economy expanded solidly in August, according to a monthly survey by the nation's purchasing managers.
It was the third consecutive monthly expansion, and economists saw it as another sign that the nation's economic recovery was under way at a steady, albeit gradual, pace.
The National Association of Purchasing Management said yesterday that its monthly index of business activity edged up to 54.8 percent, from 51.8 percent in July.
The index, compiled from interviews with purchasing officers at more than 300 industrial companies across the country, was at ** 50.9 percent in June. Before that, the survey had indicated a decline in the manufacturing economy for more than a year.
A reading below 50 percent indicates that the manufacturing economy is declining, while a reading above 50 percent indicates an expansion.
"The index demonstrates that economic activity is still rising, and, measured by this index, it appears that the pace of expansion has accelerated recently," said Andrew F. Brimmer, a former governor of the Federal Reserve and president of Brimmer & Associates, an economic consulting firm in Washington.
"The reduction in inventories suggests that production in the future will most likely pick up somewhat as demand continues to expand."
The purchasing managers' report came out as the government released data stating that construction spending rose 1.6 percent in July.
The two reports sent stock prices higher briefly yesterday morning, but the market later fell.
Mr. Brimmer said that a gradual increase in prices in the economy indicated "there is little pressure on capacity at the moment."
Mr. Brimmer added, "This suggests that the industrial sector is sharing and is supporting the economic recovery."
The purchasing managers' report is considered an important economic indicator because it is based on a survey of managers from a wide range of industrial companies. Also, it is the first important indicator each month of how the nation's economy performed in the previous month.
The survey indicated that production rose moderately in August, while employment declined. Also, new orders for export expanded last month at a faster pace than in the previous month.
The August figures represented the highest level in the purchasing managers' survey since December 1988, when the index stood at 56 percent.
"The economic recovery galvanized in August," said Robert J. Bretz, director of corporate purchasing at Pitney Bowes Inc. and chairman of the association's survey committee.
"The continued growth in the manufacturing economy was apparently achieved without any growth in inventory," he said.
xTC Mr. Bretz and several economists suggested that the gain in new orders was particularly significant because it served as a harbinger of the pace of industrial production in the months to come.