CNNMoney reports that Supply Management's (ISM) manufacturing activity rose significantly in July, suggesting that while the sector remains in contraction (July is the 18th straight month of contraction), there's room for cautious optimism and a possibility of growth in the current quarter.

The Tempe, Ariz.-based ISM manufacturing index reading of 48.9 beat estimates from economists, who expected a jump to 46.5 from June's 44.8, according to a Briefing.com consensus survey. The month-to-month improvement indicates that the rate of contraction has slowed, but not reversed. Manufacturing is a key gauge of the strength of the overall economy.

The monthly report is a national survey of ISM members, who are purchasing managers in the manufacturing sector. Index readings above 50 signal growth, while levels below 50 indicate contraction. Readings below 41.2 are associated with a recession in the broader economy.

The data track new orders, production, employment, supplier deliveries, inventories, customers' inventories, backlog of orders, prices, new export orders, imports and buying policy.

Of the 18 manufacturing sectors, six reported growth -- including categories such as transportation equipment, appliances and paper products. The 11 that reported contraction included machinery and food.

The key new orders component jumped to 55.3 in July, from 49.2. New orders are an indicator of manufacturing activity in the near future. The rise in new orders broke nine straight months of decline, and"it's encouraging to see that index jump above the expansion mark," Bullard said.

For the complete story, visit http://money.cnn.com/2009/08/03/news/economy/ISM_manufacturing/index.htm?postversion=2009080310