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NEW YORK (Reuters) - U.S. manufacturers are "cautiously optimistic" that growth will continue this year amid an uptick in sales and production, though many cite uncertainty over U.S. government policy as a concern, according to a survey from the National Association of Manufacturers (NAM).
Growth and hiring in the sector continue to be "modest at best," the quarterly survey read, though it added that a NAM model suggested that production could rise 3.5 percent over the next two quarters, "which could indicate a pickup in activity from the current pace."
The group has come under pressure this year, hurt by weaker global demand and cuts in government spending. Government policy continues to be a concern, according to the survey, with nearly three-fourths of manufacturers citing rising health care costs as their biggest challenge.
"Many respondents noted uncertainties in the implementation of the Affordable Care Act as a major concern, and many are still unaware of their premium costs for next year," wrote Chad Moutray, chief economist at the National Association of Manufacturers. "There is a strong perception that these costs will rise significantly, particularly at the small and medium-sized level."
While bond and equity markets have been strongly tethered to U.S. Federal Reserve policy, uncertainty over when the central bank will begin to slow its accommodative monetary policies was not viewed as a major concern by the 285 manufacturers that participated in the survey.
The respondents indicated "at least a moderate degree of concern" over Fed policy, "but perhaps not as much as anecdotal evidence might have suggested," the NAM said.
There have been signs of improvement in the manufacturing sector. The Institute for Supply Management's August read on manufacturing grew was at its highest level since June 2011.
Reporting by Ryan Vlastelica; Editing by Nick Zieminski