U.S.
manufacturing grew last month at its fastest pace in more than two years, with
the Institute for Supply Management's (ISM) index at its highest level since
June 2011.
The
index shows national factory activity rising to 55.7 in August from 55.4 the
prior month, which beat expectations for 54. A measurement over 50 indicates
expansion in the manufacturing sector.
This
data suggests the U.S. economy is gaining traction and may spur the Federal
Reserve to begin tapering the bond-buying program soon.
New
manufacturing orders also reported their best levels in more than two years. The
reading for new orders minus inventories, a way to determine so-called final demand,
showed its highest level in more than three years, as well. That measure of
demand has now risen for three straight months, potentially adding more
evidence to support a Fed pullback in bond buying.
Even
with positive reports on manufacturing, the Fed is closely watching unemployment
data. The goals is to end the bond-buying program when unemployment is at 7.0
percent with the ultimate goal of seeing unemployment at 6.5 percent.
Currently, unemployment is at 7.4 percent.
The Fed is currently buying
$85 billion per month in Treasuries and mortgage-backed securities, but
policymakers have hinted at exiting from the strategy as the U.S. economy grows
strong enough to stand on its own. A stronger U.S. economy could get the Fed to
start the bond-buying program as soon as the next board meeting on September 17th
and 18th.