US manufacturing activity surged by 1% last month, with auto production recording its biggest rise in five years.

The highly watched Institute for Supply Management’s factory index rose to 57.1 in July, the highest reading since April 2011. Readings above 50 signal expansion, and readings below 59 signal contraction.

Last month’s gain was the largest since February and reflected increases across all major categories.

Auto production led the way with a +10.1% leap, its biggest rise in five years. Cars and light trucks sold at a 16.4 million yearly pace in July after a 16.9 million pace in June – the strongest since July 2006, according to data from Ward’s Automotive Group.

There was also strong machinery output during the month.

Manufacturing accounts for about 12 percent of the US economy and the latest figures indicate that business investment is beginning to pick up.

The strong manufacturing report means the US economy is still accelerating on top of the second quarter’s robust +4% annual pace that is consistent with 3% growth this quarter.

The strong rise in manufacturing and a 0.3% advance in mining output offset a mild weather-related 3.4% decline in utilities production, for a +.4% rise in industrial production in July. 

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