The pace of growth in US manufacturing picked up last month, even as measures of new orders and exports eased, underscoring how the economy is recovering at a gradual clip.
Separate data on Monday showed construction spending suffered its biggest drop in seven months in February, prompting some economists to lower their sights for first-quarter growth.
The Institute for Supply Management (ISM) said its index of national factory activity rose to 53.4 from 52.4 in February, topping economists’ expectations of 53.0.
It was a rebound for the sector after the pace of growth unexpectedly slowed in February and there were signs of stronger hiring. Even so, the forward-looking gauge of new orders was modestly weaker in March, easing to 54.5 from 54.9.
A measure of exports also fell to 54.0 from 59.5, a potential sign of the impact of a weaker Europe.
“The economy is still locked on a very gradual healing trajectory,” said Steven Ricchiuto, chief economist at Mizuho Securities in New York, of Monday’s data.
Data from the Commerce Department showed US construction spending fell 1.1 per cent to an annual rate of $US808.86 billion, the lowest level since October as investment in private and government projects fell.
Spending in January was revised to show a much bigger 0.8 per cent fall instead of the previously reported decline of just 0.1 per cent.
Barclays cut its forecast for economic growth in the first quarter of 2012 to 2.0 per cent from 2.4 per cent, while Goldman Sachs lowered its outlook to 2.1 per cent from 2.3 per cent.
US stocks rose in midday trading, boosted by commodities shares, while Treasuries prices rose on the mixed data.
Federal Reserve Chairman Ben Bernanke said last week it was too soon to declare victory in the economic recovery. Investors will watch for any insight into the central bank’s thinking on another round of bond-buying to help spur growth when minutes from the latest policy-setting meeting are released on Tuesday.
The ISM index has been stuck in a tight range in the low 50s since last summer, pointing to steady, though slow, growth for the sector.
In contrast, the euro zone’s manufacturing sector contracted for an eighth straight month in March, with the downturn spreading to the core economies of Germany and France. Factory activity in China strengthened but was far from robust.
“Manufacturing is still chugging along here in the US even though manufacturing is in a recession in Europe and just barely growing in China,” said Christopher Low, chief economist at FTN Financial in New York.
The employment index rose to its highest level in nine months at 56.1 from 53.2.
The Labor Department issues a comprehensive look at the job market in its March nonfarm payrolls report on Friday, which is expected to show manufacturers added 20,000 jobs last month.
The ISM report showed prices paid eased to 61.0 from 61.5 after a jump the month before. Higher oil and gasoline prices have caused worries businesses and consumers could start to feel squeezed.
Though the elevated reading should be monitored, the impact of the run-up in commodity prices appears more subdued than last year, said Alistair Bentley, economist at TD Bank Group.
Reuters