* U.S. Markit PMI slips to 53.1 in August, new orders up
* ISM Aug manufacturing PMI highest since June 2011, above
* Construction spending gains 0.6 pct to an annual rate of
$901 bln in July
* More robust growth could convince Fed to pull back on bond
By Luciana Lopez
NEW YORK, Sept 3 Stronger-than-expected data on
U.S. manufacturing and construction spending on Tuesday hinted
the world's biggest economy was gaining traction, potentially
supporting views the Federal Reserve will soon slow its massive
The U.S. manufacturing sector grew last month at its fastest
pace in more than two years, with the Institute for Supply
Management's (ISM) index of national factory activity rising to
55.7 in August from 55.4 the prior month.
That comfortably beat expectations for 54, with the index at
its highest since June 2011.
A reading above 50 indicates expansion in the sector.
"This was an unambiguously positive report, signaling a
further acceleration in manufacturing momentum in August," said
Millan Mulraine, director of U.S. research and strategy at TD
Securities in New York.
New orders also marked their best level in more than two
years, with that sub-index jumping to 63.2 from 58.3.
The reading for new orders minus inventories, a way to
extrapolate so-called final demand, marked its highest 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.
Employment, however, slipped to 53.3 from 54.4.
Jobs data are especially important to the Fed, which wants
to see the unemployment rate closer to 6.5 percent. It is
currently 7.4 percent.
The manufacturing data helped accelerate a slide in
Treasuries prices on Tuesday, with U.S. 10-year notes down one
point and 30-year bonds down two points.
U.S. construction spending rose in July, too, climbing 0.6
percent to an annual rate of $901 billion, the Commerce
Department said. The growth rate was above the median forecast
in a Reuters poll of analysts.
In addition, demand picked up in the U.S. manufacturing
sector in August, a separate report showed.
Financial data firm Markit said that while its final U.S.
Manufacturing Purchasing Managers Index eased to 53.1 from
July's reading of 53.7, a pickup in new orders and a drop in
inventories pointed to faster growth ahead.
"Inventories of finished goods showed the largest fall since
2009 as some companies reported that demand often exceeded
production," said Markit chief economist Chris Williamson.
"Factories will need to ramp up production to replace depleted
inventories given this order book growth."
Faster global growth could help persuade policymakers at the
U.S. Federal Reserve to slow their massive bond purchase program
The bank is now 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 more vigorous U.S. economy could nudge the Fed closer to a
pullback as soon as its next meeting on Sept. 17-18.
But with U.S. data still often painting a mixed picture,
that potential September exit could yet change.
Investors are awaiting the August nonfarm payrolls report,
due on Friday, for more clarity on the health of the U.S. jobs
Other data on Tuesday and earlier in the week also pointed
to more robust global growth.
In China, domestic demand helped the services sector grow
steadily in August, suggesting government measures have started
to steer Asia's biggest economy out of its longest slowdown.
European factory data also pointed to growth in August,
including faster-than-expected manufacturing growth in Britain.
The survey was especially welcome after a long economic
stagnation in the U.K., which earlier this year flirted with a