U.S. manufacturing activity rebounded a bit more than expected in March, according to an industry report released on Monday, as production, new orders and hiring all picked up.
The Institute for Supply Management (ISM) said its index of national factory activity rose to 55.3 from 54.2 in February, which had marked the lowest level since November 2016. The reading was slightly above expectations of 54.5 from a Reuters poll of 69 economists.
A reading above 50 indicates expansion in the manufacturing sector and a reading below 50 indicates contraction.
The employment index rose to 57.5 from 52.3 a month earlier. Expectations called for a reading of 52.4.
The new orders index rose to 57.4 from 55.5 in February. The prices paid index rose to 54.3, indicating that prices producers are paying for materials rose for the first time since December.
Production also picked up, with that index at ticking up to 55.8 from 54.8 the month before.
Highlighting Monday's other economic data, U.S. construction spending increased for a third straight month in February, boosted by gains in both private and public construction projects, offering some good news on the economy following a string of weak reports.
The Commerce Department said on Monday construction spending rose 1.0 percent to a nine-month high after an upwardly revised 2.5 percent surge in January.
Economists polled by Reuters had forecast construction spending falling 0.2 percent in February after a previously reported 1.3 percent jump in January.
Construction spending increased 1.1 percent on a year-on-year basis in February.
In February, spending on private construction projects rose 0.2 percent after vaulting 1.5 percent in January. Investment in private residential projects increased 0.7 percent, rising for a third straight month.
The strong gains are despite a sluggish housing market, which has been held back by higher mortgage rates, expensive building materials as well as land and labor shortages. But there are signs of green shoots emerging in the housing market as mortgage rates have declined from last year’s lofty levels.
Spending on private nonresidential structures, which includes manufacturing and power plants, fell 0.5 percent in February after jumping 1.1 percent in January.
Investment in public construction projects rose 3.6 percent in February after accelerating 5.7 percent in the prior month.
Spending on federal government construction projects rose 0.9 percent to the highest level since October 2017, after soaring 5.7 percent in January.
Investment in state and local government construction projects rose 3.8 percent after surging 5.7 in January.
Meaanwhile, U.S. business inventories increased more than expected in January as sales rose moderately, and businesses were taking the longest time in nearly 1-1/2 years to clear shelves, a sign of slowing demand.
The Commerce Department said on Monday that business inventories rose 0.8 percent in January. Data for December was revised higher to show inventories advancing 0.8 percent instead of the 0.6 percent increase previously reported.
Inventories are a key component of gross domestic product and economists polled by Reuters had forecast stocks at businesses rising 0.5 percent in January.
The January business inventory report was delayed by a five-week partial shutdown of the federal government that ended on Jan. 25. The February report, which was scheduled to be published on April 16, will now be released on April 18.
Retail inventories increased 0.8 percent in January after surging 1.1 percent in December. Motor vehicle inventories jumped 1.2 percent, the biggest gain since August 2018.
Retail inventories excluding autos, which go into the calculation of GDP, increased 0.6 percent in January after rising 1.3 percent in the prior month. This suggests inventory investment could contribute to first-quarter GDP.
Wholesale inventories increased 1.2 percent in January, the most since September 2012. Stocks at manufacturers rose 0.5 percent. The government reported last week that inventory investment added 0.11 percentage point to the fourth quarter’s 2.2 percent annualized growth rate.
Business sales rebounded 0.3 percent in January after dropping 0.9 percent in December. Retail sales rose 0.8 percent in January. Sales at wholesalers advanced 0.5 percent while those at manufacturers fell 0.4 percent.
At January’s sales pace, it would take 1.39 months for businesses to clear shelves, the most since August 2017, up from 1.38 months in December.