Industrial sector leads economic rebound

NEW YORK - The U.S. manufacturing sector expanded in March at its strongest pace in 5 1/2 years, leading the rebound from the recession on growth in exports and inventory rebuilding.

Another drop in construction spending in February, however, underscored weakness in real estate. But the number of people filing first-time claims for unemployment benefits slipped last week as the economy moves closer to generating more jobs.

The Institute for Supply Management, a trade group of purchasing executives, said yesterday its gauge of industrial activity rose to 59.6 in March from 56.5 in February.

It is the eighth straight month of expansion and the fastest growth since July, 2004, when the index was 59.9.

Factories are boosting production for exports and their customers are slowing the drawdown of their inventories, helping power the economic recovery worldwide.

Manufacturers said their inventories grew after 46 straight months of contraction, according to ISM. Letting inventories rise is a signal that companies expect factory activity and orders to increase.

Seventeen of the 18 industries that the ISM surveys reported growth last month, led by the apparel sector. Only makers of plastics and rubber products reported contraction.

Also contracting, according to a U.S. Commerce Department report, was construction spending. It fell 1.3 percent in February to a seasonally adjusted annual rate of $846.23 billion. That was the lowest level since November, 2002, and the fourth straight month of decline.

Economists were predicting builders would pare spending by 1 percent.

The housing market led the country into a recession and despite some improvements at the end of last year, the sector this year is showing fresh signs of weakness.

The jobs market, though, is improving. The Labor Department said yesterday that new jobless benefit claims dropped 6,000 to a seasonally adjusted 439,000 last week, nearly matching analysts' estimates. It's the fourth drop in five weeks.

The four-week average of claims, which smooths volatility, fell by nearly 7,000 to 447,250, the lowest total since the week of Sept. 13, 2008, just before Lehman Brothers collapsed and the financial crisis intensified.

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Construction spending is at its lowest level in 8 years, a sign that the troubled real estate market is still a sore spot for the recovery. MATT ROURKE / AP Enlarge

The U.S. manufacturing sector expanded in March at its strongest pace in 5 1/2 years, leading the rebound from the recession on growth in exports and inventory rebuilding.