Manufacturing Index for U.S. Increased in August (Courtney Schlisserman)

Sept. 1, 2010 (Bloomberg) -- Manufacturing in the U.S. expanded at a faster pace than forecast in August as factories added workers and cranked up production.

The Institute for Supply Management’s factory index rose to a three-month high of 56.3 from 55.5 in July, the Tempe, Arizona-based group said today. Readings greater than 50 signal growth, and the figure was projected to drop to 52.8, according to the median forecast in a Bloomberg News survey.

Stocks rallied as U.S. and China manufacturing figures tempered concern the global economic recovery will wane without more government stimulus. Production gains may partially compensate for a slowdown in consumer spending and sluggish housing market that are causing the world’s largest economy to cool in the second half of the year.

Manufacturing is “one of the bright spots,” said Hugh Johnson, chief investment officer at Hugh Johnson Advisors LLC in Albany, New York, the only analyst surveyed to predict the index would rise. Still, “you have to have increased demand from consumers and businesses for these numbers to be sustained.”

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