The pace of growth in the U.S. manufacturing sector accelerated in July to the highest level in two years as new orders surged, supporting the view the economy will pick up in the second half of the year, an industry report showed on Thursday.

The Institute for Supply Management (ISM) said its index of national factory activity rose to 55.4 from 50.9 in June, topping expectations for 52. It was the highest since June 2011.

New orders also racked up their best level in more than two years, jumping to 58.3 from 51.9. Employment gained to 54.4 from 48.7, boding well ahead of the closely watched jobs report due to be released on Friday.

A reading above 50 indicates expansion in the sector.

Export orders slipped to 53.5 from 54.5, though imports were stronger, rising to 57.5 from 56.0.

Hurt by government spending cuts and weaker global demand, manufacturing growth has been lackluster of late and the sector contracted in May.

But the pick up in July added to economists' views that the economy is on stronger footing for the last half of the year. Data on Wednesday showed the economy grew at a quicker than expected pace in the second quarter and should continue to gain momentum. (