Manufacturing in the U.S. expanded at the fastest pace in more than two years as orders and production jumped, indicating more factories were growing optimistic about the second half of the year.

The Institute for Supply Management's factory index increased to 55.4, the strongest since June 2011 and exceeding the highest projection in a Bloomberg survey of economists, after 50.9 in the prior month, the Tempe, Arizona-based group's report showed today. Readings above 50 indicate expansion, and the median forecast of 84 economists surveyed by Bloomberg called for an advance to 52.

Sustained demand for automobiles and for materials tied to the recovery in housing are keeping assembly lines busy even as global markets struggle to improve. Manufacturing, which accounts for about 12 percent of the economy, may also find relief in the second half of the year as the headwinds associated with cuts in the federal budget and higher income taxes dissipate.

"It looks like we're starting the third quarter off on a fairly solid note," said Sam Bullard, senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. "Manufacturing is holding in relatively well." The figure underscores "the Fed's forecast that we're likely to see a tick up in the second half of the year."

David Fuller's view This is testimony to the USA's entrepreneurial drive, resulting in two obvious advantages: its domestic natural gas price currently trading at $3.40, and a lead in many technologies which is increasing.