The U.S. manufacturing sector expanded at the fastest pace in nearly six years in April, as factories continue to lead the economy's rebound.
The Institute for Supply Management, a private trade group of purchasing executives, said Monday its manufacturing index rose to 60.4 last month from 59.6 in March. It's the ninth straight month of growth. A level above 50 indicates expansion.
It is the fastest pace of growth since June 2004 when the index was at 60.5.
Economists polled by Thomson Reuters had expected a lower reading of 60.
The growth in manufacturing seemed stable, ISM said. "We don't have any reason to believe this won't continue," said Norbert Ore, chair of the ISM's manufacturing survey on a conference call.
The strong start to the second quarter suggests that the economy could grow 3 percent or more in the second quarter, said Miller Tabak analyst Dan Greenhaus in a research note.
New orders, a gauge of future production, jumped to 65.7 from 61.5 in March, according to the ISM report. Production rose to 66.9, the highest level since January 2004 from 61.1 in March.
ISM said its employment index, which measures employers' willingness to hire, rose to 58.5, the strongest level since January 2005, from 55.1 in March.
Seventeen of the 18 industries surveyed reported growth.
Inventories fell to 49.4 from 55.3 in March. Before March, inventories had shrunk every month since April 2006 as manufacturers, wary of future demand for their products, cut back on supplies.
The rebuilding of inventories contributed to two-thirds of the economic growth in the fourth quarter of 2009 and half the of the growth in the first three months of this year.
Ore said the "inventory correction" would probably be done by June. That means continued growth in manufacturing will depend on a healthier consumer demanding more goods from companies and businesses continuing to spend.
Manufacturers said they believed their customers' inventories were still too low, suggesting they will have to keep increasing production.
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