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US manufacturing boosted to 3-year high by new orders, employment

An employee uses a mig welder to create a welding beed on the inside seem of a Pioneer coal stove at the Leisure Line Stove Co. facility in Berwick, Pennsylvania.
Ty Wright | Bloomberg | Getty Images
An employee uses a mig welder to create a welding beed on the inside seem of a Pioneer coal stove at the Leisure Line Stove Co. facility in Berwick, Pennsylvania.

The U.S. manufacturing sector expanded last month at the fastest pace in more than three years boosted by a jump in its new orders and employment readings, an industry report released on Friday showed.

The Institute for Supply Management (ISM) said its index of national factory activity rose to 57.1 in July, the highest since April 2011, from 55.3 in June. The reading topped expectations of 56, according to a Reuters poll of economists. A reading above 50 indicates expansion in the manufacturing sector.

The employment component jumped to 58.2 in July from 52.8 the previous month, hitting its highest since June 2011 and handily beating the expected 53 mark. New orders rose to 63.4 from 58.9.

Read MoreJob creation misses expectations, rate up to 6.2%

Construction activity plummets

U.S. construction spending fell in June by the largest amount in more than three years as housing, non-residential construction and government spending all weakened.

The Commerce Department says construction spending dropped 1.8 percent in June on a seasonally adjusted basis after rising by a revised 0.8 percent in May. It was the biggest setback since a 2.8 percent fall in January 2011.

The weakness was widespread with spending on housing down for a second straight month, falling 0.3 percent, while non-residential building activity fell 1.6 percent, the biggest decrease since January. Spending on government projects dropped 4 percent, the biggest decline in more than a decade.

The June performance represented a setback to hopes stronger construction activity will help support overall economic growth.

--By Reuters, with The Associated Press

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