Factory activity improves modestly in August: Markit

Rolled steel is seen after being treated on the pickle line at the Severstal steel mill in Dearborn, Michigan June 21, 2012.

NEW YORK (Reuters) - Manufacturing improved slightly in August but hiring in the sector slowed and weak overseas demand for American goods kept the pace of overall growth subdued.

Financial information firm Markit said its U.S. "flash" manufacturing Purchasing Managers Index edged up to 51.9 in August from 51.4 in July.

The August reading marked the first monthly increase in five months. But it was the third weakest result since the manufacturing sector stopped shrinking in October, 2009.

A reading above 50 indicates expansion.

"Although the latest survey data pointed to a slightly better performance than that registered in July, it nonetheless suggested that manufacturing continued to take a hit from weak economic conditions in key export markets," said Markit senior economist Rob Dobson.

While increased marketing and lower prices helped overall new orders rise to 52.6 from 51.0, new export orders fell outright for a third consecutive month.

Recession in much of Europe and a slower pace of growth in China and other developing countries have helped to cool what had been fairly steady growth in U.S. manufacturing in 2011.

The rate of job creation slowed for a fifth straight month, with the index's employment component slipping to 52.5 in August from 52.7 in July.

The broader U.S. economy grew at a sluggish 1.5 percent pace between April and June, though more recent economic data has suggested it may have started to pick up some momentum.

That has caused some economists and investors to question whether the Federal Reserve will launch another round of monetary easing next month.

Minutes from the Fed's most recent meeting released earlier this week showed that officials thought further easing was warranted "fairly soon," but that meeting was held before recent reports showed improvement in hiring and retail sales.

The "flash," or preliminary reading, is based on replies from about 85 percent of the U.S. manufacturers surveyed. Markit's final reading will be released on the first business day of the following month.

(Reporting By Steven C. Johnson; Editing by Chizu Nomiyama)