Manufacturing registered its fastest pace of growth in nearly six years in April while data on construction and consumer spending pointed to further strength in the economy.
Consumer spending, which accounts for over two-thirds of economic activity, rose in March for a sixth straight month, the Commerce Department reported on Monday.
The Institute for Supply Management (ISM) said its index of national manufacturing activity rose to 60.4 in April from 59.6 in March, beating Reuters' median forecast for a reading of 60. A rise in the employment component showed employers were more confident about hiring.
This is a strong report on the economy, indicating that the production recovery continues to move ahead at a very good pace, said Brian Bethune, chief U.S. financial economist at IHS Global Insight in Lexington, Massachusetts.
On Wall Street, U.S. stock indexes rose more than 1 percent apiece and the dollar strengthened against both the yen and euro, helped by the day's economic data. Prices for safe-haven U.S. Treasury debt slipped.
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Markets are watching the numbers on the world's largest economy closely for signs of the strength in its recovery, and especially for clues about hiring prospects.
Despite the positive numbers, a top White House economic aide said more effort was needed to help the economy and warned a pull back in government aid could harm a fragile recovery.
Public opinion polls show many voters growing concerned about exploding federal budget deficits after the government's emergency spending to counter the recession.
Consumer spending rose 0.6 percent after rising by an upwardly revised 0.5 percent in February, previously reported as a 0.3 percent gain, according to the Commerce Department report. Analysts had expected an increase of 0.6 percent in March.
The data preceded Friday's much-awaited U.S. April jobs report, expected to show an increase in employment gains from the prior month.
In another report from the Commerce Department, U.S. construction spending also rose unexpectedly in March to post its first advance since October. [ID:nN30128894] The rise of 0.2 percent was the largest gain since October and followed a revised 2.1 percent drop in February, previously reported as a 1.3 percent fall.
U.S. auto sales, meanwhile, rose in April, with Ford Motor Co and Hyundai Motor Co <005390.KS> leading the way.
The employment component of the ISM report rose to its highest since January 2005.
It says manufacturers are doing some hiring. Obviously, there is some job creation, Norbert Ore, chairman of ISM's manufacturing business survey committee, told reporters during a conference call.
The factory data was in line with data from overseas. Factories in the Asia-Pacific region increased production last month, while euro zone manufacturer activity hit a 46-month high.
U.S. growth data on Friday showed the economy expanded steadily in the first quarter as consumers increased spending at the fastest pace in three years.
Still, analysts worry that an unemployment rate close to 10 percent and sluggish income growth could constrain spending in coming months.
According to a Reuters survey, nonfarm payrolls likely increased by 200,000 in April, adding to the prior month's 162,000 gain. The unemployment rate, however, is expected to remain unchanged at 9.7 percent for a fourth straight month.
Monday's income report showed the U.S. savings rate dropped to 2.7 percent, the lowest level since September 2008.
The index, which is a key inflation gauge monitored by the Federal Reserve, increased 1.3 percent in February.
Separately, U.S. small- and medium-sized businesses are increasing borrowing and keeping up with repayments on existing loans, according to PayNet Inc.
The Thomson Reuters/PayNet Small Business Lending Index, which measures the overall volume of financing, rose 4 percent in March, the first year-on-year gain since October 2007, two months before the recession began.
As businesses borrow more, they are seen as likely to hire more people, said Bill Phelan, Paynet's president and founder.