U.S. factories ran at their strongest pace for over a year in September, registering large increases in new orders despite a sharp rise in the price of raw materials, according to a survey published on Monday.

The Institute for Supply Management (search) said its index of national factory activity rose to 59.4 in September from 53.6 in August, far outstripping economist's median forecast for a drop to 52.0.

Hurricanes Katrina (search) and Rita boosted manufacturing activity throughout the month as reconstruction of the areas damaged by the two storms that battered the Gulf Coast (search) in late August and late September got under way, analysts said.

"The thing that is happening of course is Katrina: it's just going to boost orders and production and prices," said Kurt Karl, head of economic research and consulting at Swiss RE in New York.

"Orders are way up, and that is what you would expect, and production is way up -- this is what you'd expect," he said.

A reading above 50 in the headline index denotes expansion in the factory sector, which has been growing since February, 2003. September's reading was the highest since August 2004.

The new orders component, a signal of future growth, rose to 63.8 from 56.4, its highest since July last year, while the prices paid index jumped to 78.0 from 62.5, reflecting the high price of oil and other commodities.

The ISM employment gauge rose to 53.1 from 52.6 in August.