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.
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 employment in the sector rose to a nine-month high, a sign that factories are stepping up hiring. 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.
Increasingly confident U.S. consumers and businesses are spending more on cars, machinery and other goods, pushing up factory output. A gauge of production rose to its highest level in three months in March.
Consumers increased their spending in February by the most in seven months, the government said Friday. That is raising expectations the economy will grow a bit faster in the current quarter.
Consumer spending on long-lasting goods, such as cars and computers, rose 1.6 percent in February. That suggests manufacturers will have to increase output to meet higher demand.
Businesses also ordered more durable goods in February, after a steep drop the previous month, a separate report last week showed. Durable goods are meant to last at least three years. Greater demand for machinery, computers, autos and aircraft drove the increase.
Orders for so-called "core" capital goods, a key measure of business investment plans, also rose. They had fallen in January by the most in a year, after an investment tax credit expired.
Manufacturing has been a key source of economic growth since the recession ended in June 2009. The sector has expanded for 32 straight months, according to the ISM's index.
A recovery in auto sales has been a big reason for the strength in manufacturing. Americans delayed auto purchases during the recession, pushing the average age of U.S. cars to record highs. That led to sharp increases in car sales as the economy recovered.
More auto manufacturing boosts output in an array of industries, including steel, tire makers, and other parts suppliers.
Rising factory output is helping the broader economy grow. Growth increased to a 3 percent annual rate in the final three months of last year, up from 1.8 percent in the previous quarter.
Many economists expect growth will slow in the current quarter because companies aren't likely to restock their shelves as much as they did in the fourth quarter. But after Friday's report on consumer spending, some analysts are boosting their estimates for growth in the January-March quarter to 2.5 percent, from 2 percent.
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