The Institute for Supply Management (ISM) said on Monday its index of national factory activity slipped to 50.8 last month from a reading of 51.8 in March. A reading above 50 indicates expansion in the manufacturing sector. A gauge of orders received by factories fell 2.5 points to 55.8 percent.

Manufacturing, which accounts for about 12 percent of the U.S. economy, has been hurt by weak export growth stemming from a strong dollar and soft global demand.

The sector has also been hammered by relentless aggressive spending cuts in the energy sector in the aftermath of last year's plunge in oil prices. Efforts by businesses to reduce an inventory overhang have resulted in fewer orders being placed with factories, causing further erosion of manufacturing.

Economic growth slowed to a 0.5 percent annualized rate in the first quarter. Given a fairly robust labor market, which is expected to boost sluggish consumer spending, economists expect gross domestic product growth to rebound in the second quarter.

The economy grew at a 1.4 percent rate in the fourth quarter. Prices for U.S. Treasuries fell after the data, as did the dollar against a basket of currencies. U.S. stocks were trading higher.

A second report from the Commerce Department showed construction spending rose to an 8-1/2-year high in March and the prior month's outlays were revised higher, pointing to sustained strength in the sector despite a sharp downturn in spending by energy firms.

Construction spending increased 0.3 percent to the highest level since October 2007, following an upwardly revised 1.0 percent jump in February, the Commerce Department said on Monday.

Economists polled by Reuters had forecast construction spending rising 0.5 percent in March after a previously reported 0.5 percent decline in February.

Construction outlays were up 8.0 percent from a year ago. Though February's outlays were revised higher, construction spending for January was revised down to show a 0.3 percent drop instead of the previously reported 2.1 percent increase.

In March, construction spending was supported by a 1.1 percent surge in private construction, which hit its highest level since October 2007. Outlays on private residential construction increased 1.6 percent.

Spending on private nonresidential structures, which also includes factories and offices, advanced 0.7 percent to its highest level since October 2008.

Public construction spending fell 1.9 percent in March as outlays on state and local government construction projects, the largest portion of the public sector segment, declined 1.4 percent. Federal government construction spending tumbled 7.4 percent in March.