NEW YORK (Reuters) - U.S. manufacturing activity hit a five-month high in August as hiring picked up and new orders increased at their fastest pace since January, an industry report showed on Thursday.
Financial data firm Markit said its "flash," or preliminary, U.S. Manufacturing Purchasing Managers Index rose to 53.9, its best showing since March, and just below economists' forecast of 54.0. The index stood at 53.7 in July. A reading above 50 indicates expansion.
Overall output, however, declined to 53.4 from 54.8, its slowest rate of growth in three months, suggesting the pace of overall U.S. economic expansion remains "disappointingly sluggish," said Markit chief economist Chris Williamson.
"Hopefully the faster growth of new orders seen during August will translate into increasingly strong production gains in coming months, and also boost hiring," he added.
New orders rose to 56.5, a seven-month high, from 55.5 in July, and firms took on new workers at their fastest pace in four months. But Williamson said the manufacturing sector "is still barely contributing to nonfarm payroll growth."
U.S. employers slowed their pace of hiring last month but the jobless rate declined. Global investors, however, still expect the Federal Reserve will start winding down its massive stimulus program this year, with many betting the central bank could slow its monthly bond purchases as soon as September.
Markit's "flash" reading is based on replies from about 85 percent of the U.S. manufacturers surveyed. A final reading will be released on the first business day of the following month.
(Reporting By Steven C. Johnson; Editing by Chris Reese)