The first economic statistic for July spooked the Treasury bond market, taking more than a point off the benchmark long bond. Wall Street fell in sympathy, with the Dow Jones index down 29 points at 4,673 at midday.
For the first time since April, the NAPM overall activity index climbed to 50.5, above the dividing line of 50 between growth and recession. There was a particularly sharp jump in new orders, a leading indicator of future activity.
Josh Feinman, an economist at Bankers Trust said: "The index provided more confirmation of a bottoming in the manufacturing sector and signs of a turnaround."
Separate evidence of a rebound in the economy came from figures for contruction spending in June. It showed its strongest gain for nine months, up 0.9 per cent to $520bn at an annualised rate. Spending on housebuilding fell for the sixth month in a row. The June advance came entirely from non-residential projects.
Three components of the NAPM activity index exceeded 50 last month - production, new orders and supplier deliveries. The association said the jump in orders to the highest level since February was the most significant element.
In addition, the separate prices component fell below 60 for the first time since January 1994. The index, closely watched by the Federal Reserve, gave a reassuring signal that inflationary pressures are weak. Mark Cliffe, international economist at HSBC Markets, said: "This is more evidence that inflation is still under control."
Britain's Purchasing Managers' Index, showed a slight rise in output last month, but confirmed that the trend in growth has slowed.
Output, orders and quantities purchased all rose modestly last month, but overall the activity index suggest that the rate of expansion has slipped to its lowest since the end of 1993. The new orders balance has remained around 50 - pointing to no change - for the past three months.
Like its American older brother, the survey showed a reduction in price pressures. The PMI price index dropped to 72.5, its lowest since December.