By Austen Hufford

Manufacturing activity across the U.S. expanded this month with conditions improving at the quickest pace in nearly two years.

The purchasing managers' flash index compiled by data provider IHS Markit registered 55.1 in January, above the 50 mark that separates expansion from contraction. The mark is above December's 54.3 and is the strongest since March 2015. Economists expected an increase to 54.4.

The improvement in business conditions was largely driven by increases in output and new orders. Companies also raised their purchasing activity and increased their payrolls in order to meet greater production requirements.

"Faster manufacturing growth and inventory rebuilding should help boost GDP in the first quarter," Chris Williamson, chief business economist at IHS Markit, said.

Markit's flash reading is based on about 85% of the responses that go into the final report, set to be released on Feb. 1.

Write to Austen Hufford at austen.hufford@wsj.com

(END) Dow Jones Newswires

January 24, 2017 10:42 ET (15:42 GMT)

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