The pace of growth in the manufacturing sector picked up for the first time in four months in June, a sign of optimism for the sputtering economy, according to an industry report released on Friday.
The Institute for Supply Management said its index of national factory activity rose to 55.3 from 53.5 the month before. The reading topped expectations for 51.8, according to a Reuters poll of economists.
A reading above 50 indicates expansion in the manufacturing sector, while a number below 50 means contraction. The report alleviated some fears over the strength of the recovery but analysts said it was not yet a clear sign that the recent weakness in growth was past.
It's too soon to say whether the soft patch is over. We had such a big drop last month. We are just seeing some of the retracement. This takes some of the sting out of last month's drop, said Robert Brusca, chief economist at Fact and Opinion Economics in New York.
U.S. stocks added to gains immediately following the data, while Treasury prices turned negative and the dollar extended gains against the yen.
The prices paid index fell to its lowest since August 2010 at 68.0 from 76.5, while inventories rose to 54.1 from 48.7. But new orders rose only marginally to 51.6 from 51.0 and analysts noted that the details of the report were not as robust as the main figure.
(Reporting by Leah Schnurr, Editing by Chizu Nomiyama)