The national purchasing managers’ report for activity in July rose to 56 from an unrevised levels of 55 during June, according to the Institute of Supply Management.

Strength in the sub-index of production was notable with a 4.6 point increase which was its largest monthly increase in two years.

New orders also rose but the gain was a moderate 0.7 points to a still high level of 660.3. Any reading above 50 indicates growth.

Export orders slipped three points but still indicated expansion in order books with a reading of 56.0. For the quarter, the index was at its highest level since 1Q06.

The employment index fell for the second consecutive month to 51.1.

To the downside also were the speed of vendor deliveries and the inventories index which fell for the third consecutive month.

Pricing pressure eased for the second month but the index remained at a high 68.0. That is up from the lows just below 50 during the last quarter of 2006.