US manufacturing grew for a fifth straight month in June as solid demand prompted factories to boost production to the highest level in three years, providing more evidence that the hard-hit factory sector's rebound is gaining momentum.
Economists said the ongoing rise in factory output should result in better profits later in the year - key for a stock market battered by revelations of accounting scandals and bruised investor confidence.
The Institute for Supply Management (ISM) said its monthly manufacturing index rose to 56.2 in June - the fastest pace since February 2000 - from 55.7 in May and beating forecasts for a rise to 55.8.
Any reading above 50 suggests growth in the sector that makes up about one-sixth of the economy, while one below 50 indicates contraction.
"The steepness of June's reading suggests we ought to see sizable improvements in profitability in the second half of the year. This is very much an upbeat reading on the US economic recovery," said Mr John Lonski, chief economist at Moody's Investors Service.
US stocks showed little reaction. Ongoing jitters about profits kept the broad Standard & Poor's 500 index mostly flat on the session.
With the economy slowing the second quarter from a 6.1 per cent spurt of growth in the first and the outlook murky, many analysts believe the Federal Reserve will wait until late in the year or 2003 before hiking interest rates from four-decade lows of 1.75 per cent.
US factories shed more jobs, extending a trend since mid-2000 even as the Employment Index rose in June to 49.7 from 47.3 in May and moved ever closer to a level that would indicate job growth.