The Institute of Supply Management said its rose to 61.3 in August, from 58.1 the previous month.
Economists had forecast a reading of 57.6.
A reading above 50 for the index indicates expansion in the sector, and a reading below 50 signals contraction.
The rose to 65.1 in August from 60.2 a month earlier.
The increased to 58.5 last month from the prior 56.5. Economists had predicted a drop to 56.0.
“Demand remains strong, with the New Orders Index at 60% or above for the 16th straight month, and the Customers’ Inventories Index remaining low,” Timothy Fiore, chairman of the ISM business survey committee, said in the report.
Although demand is robust, Fiore signaled that the nation’s employment resources and supply chains continue to struggle.
“Respondents are again overwhelmingly concerned about tariff-related activity, including how reciprocal tariffs will impact company revenue and current manufacturing locations,” he said.
“Panelists are actively evaluating how to respond to these business changes, given the uncertainty,” Fiore concluded.
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