WASHINGTON • United States manufacturing expanded at a modest pace last month after unexpectedly shrinking in August, underscoring limited progress for the battered sector.

The Institute for Supply Management's (ISM) index advanced to 51.5 from August's 49.4 reading that had marked the first contraction in six months, figures from the group showed yesterday. A reading above 50 signals growth.

New orders and production swung into expansion territory last month, indicating prospects are gradually improving across America's manufacturing landscape. At the same time, factories continued to focus on becoming leaner by trimming inventories and cutting employment.

"What we have is more akin to a slow patch in manufacturing," Mr Scott Brown, chief economist for Raymond James Financial in Florida, said before the report. "As the overall pace of economic growth slows, some sectors of the economy look weaker."

The ISM new orders gauge jumped to 55.1 from 49.1 in the prior month, the biggest increase since March. The group's measure of production rose to 52.8 from 49.6. The index of export demand was little changed at 52 from 52.5.

A gauge of factory employment improved to 49.7 in September from 48.3 in August, continuing the streak of contractions in all but one month so far this year.

Some gauges improved while still signaling contraction. The measure of factory inventories edged up to 49.5 from 49, while order backlogs increased to 49.5 from 45.5.

Meanwhile, across the Atlantic, British factories had their strongest month in more than two years in September, a survey showed, raising doubts about whether the central bank and finance ministry will announce more stimulus measures to offset the economic hit of the Brexit vote.

The Markit/CIPS Purchasing Managers' Index (PMI) showed a surge in export orders, helped by the fall in the value of the pound after June's referendum vote to leave the European Union.

Last month, the manufacturing index reached its highest level since June 2014, rising to 55.4 from 53.4 in August, as it continued to rebound from a three-year low in July.

The pound erased some of its earlier losses made when it slumped to a three-year low against the euro following Prime Minister Theresa May's announcement of a March deadline for starting formal divorce talks with the EU.

Last month's factory PMI suggested third-quarter growth in manufacturing - which accounts for 10 per cent of Britain's economy - will be the strongest so far this year.

BLOOMBERG, REUTERS