A separate index measuring non-manufacturing activity fell for a second month, slipping to 53.4 from 54.5 previously, reflecting slowing momentum in China's services sector.
The seasonally adjusted Purchasing Managers' Index (PMI) - a composite indicator created to provide a single-figure snapshot of operating conditions in the manufacturing economy - registered 51.6 in August, up from 51.1 in July to signal an improvement in overall operating conditions.
"(The) survey showed growth moving broadly sideways, maintaining the recent positive trend of improvement in the health of the manufacturing sector", said Paul Smith, senior economist at IHS Markit, which compiles the survey.
"Output and new orders increased at faster rates, while employment growth remained historically sharp", said Trevor Balchin, Economics Director at IHS Markit.
At the same time, the survey detected a rise in business confidence to its highest level in three months.
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Britain's manufacturers saw growth surge in August as new orders from both the United States of America and Europe flooded into the country and supported the sector, according to the latest PMI reading from IHS Markit.
Input prices continued to rise sharply though only 4 percent of the companies surveyed said they were able to pass on some of the increase to consumers, a further setback for the Bank of Japan's efforts to reach its elusive 2 percent inflation target. However, nearly 31% of companies said they experienced an increase in the price of materials required for their operations, generally linked to the rising cost of commodities.
Size was no barrier to success, either, with growth reported across all sectors and amongst SMEs and large-scale manufacturers alike. The rate of job creation was the highest in three years. Following the GST launch, new orders and output dropped for the first time since the downturn in December a year ago post demonetisation. This is looking increasingly likely during the near-term, given the breadth of the expansion.
The manufacturing PMI rose by 0.5 points to 51.6 in August, the second highest reading of activity this year and the third consecutive month it has expanded after a period of softness earlier in the year.