WASHINGTON —
U.S. factories stepped up hiring and production in March, the latest evidence that manufacturing is growing at a healthy pace and fueling the recovery.
But a separate report on construction spending showed that building activity declined in February for the second straight month, disappointing economists.
The reports show “that the economy is still locked on a very gradual healing trajectory,” said Steven Ricchiuto, chief economist at Mizuho Securities.
A strong manufacturing sector also supports economists’ predictions that the number of jobs created in March would remain above the crucial 200,000 mark. Those numbers are slated to be released Friday.
“It’s a gift that can keep on giving, so to speak,” said Stuart Hoffman, chief economist for PNC Financial Services.
The Institute for Supply Management, a trade group of purchasing managers, said Monday that its index of manufacturing activity rose to 53.4 in March. That’s up from 52.4 in the previous month. Readings above 50 indicate the sector is expanding.
A measure of manufacturing employment rose to a nine-month high, a sign that factories are hiring more workers. Manufacturers are already a big source of job gains. They’ve added more than 100,000 jobs in the past three months, about one-seventh of all net gains.
Driving the improvement in manufacturing has been the rebound in the once-moribund auto market. Analysts estimate that in March, the yearly pace of new-car sales hit nearly 15 million, on track with the previous month. The data will be released today.
“The heart of the manufacturing recovery — and really a main driver of the economy right now — is durable-goods manufacturing,” said Robert Dye, chief economist for Comerica Bank.
The ISM index showed autos weren’t the only bright spot in March. Dye said he was particularly encouraged by the performance among nondurable manufacturing sectors such as petrochemicals and nonmetallic minerals. Both were among the top five industries reporting growth last month.
Separately, the Commerce Department said construction spending fell 1.1 percent in February, after a fall of 0.8 percent in the previous month. Spending on homebuilding, office construction and government projects all fell.
The weak report shows that the construction industry is still struggling more than 2K years after the recession ended.
The ISM survey found that new orders are increasing but at a slightly slower pace than in February. Order backlogs rose at a faster pace. And manufacturers said their customers are reporting low inventories, which suggests they are likely to keep ordering new goods. All of those indicators suggest production should stay healthy in the coming months.
