The ISM said that its index of activity in the sector rose to 56.0 in June from 55.0 in May, with a reading above 50 indicating growth in the sector. The increase came as a surprise to economists, who had been expecting the index to come in unchanged at 55.0.
With the increase, the index indicated the fastest pace of manufacturing sector growth since April of 2006, when the index came in at 56.9.
The unexpected acceleration was largely due to faster production growth, with the production index rising to 62.9 in June from 58.3 in the previous month. The new orders index also edged up to 60.3 from 59.6.
At the same time, the report showed a slowdown in the pace of employment expansion, as the employment index slipped to 51.1 in June from 51.9 in May.
The pace of price growth also slowed compared to the previous month, although it remains at an elevated level. The prices index fell to 68.0 in June from 71.0 in the previous month.
Executives in the paper products industry noted that petroleum-based material prices have begun to escalate at a faster pace.
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