WASHINGTON—The Institute for Supply Management index, from a survey that aims to capture manufacturing business conditions, increased to 59.3 from 57.7, data showed Monday. The factory gauge remains elevated, signaling that corporate tax cuts and consumer strength continue to drive demand and expansion.

New orders and employment recovered after slumping in October, while a gauge measuring prices factories paid for materials tumbled by the most in more than six years. That bigger-than-expected decline contrasts with warnings from some economists that the trade war with China may fuel inflation. Plunging prices for oil, a major indicator of manufacturing expenses, may be a contributor to the drop.
Even amid broader strength, trade still weighed on manufacturing: An index of exports held at the lowest level since late 2016 and a measure of imports fell to the lowest since June 2017. Backorders increased, indicating manufacturers still confront bottlenecks in getting goods to customers. At the same time, the index of supplier deliveries fell, though the measure still indicated that delivery times are slowing.
Four of the five underlying components of the main index increased, while 13 of 18 manufacturing industries reported growth in November.