NEW YORK – U.S. manufacturing activity powered ahead in April but soaring energy and metals costs were making factory managers apprehensive, according to an industry report published Monday.
The Institute for Supply Management's index of factory performance climbed to 57.3 last month, its highest since September, from 55.2 in March. Wall Street analysts had looked for little change.
A reading above 50 indicates growth in the sector, which according to this measure has been expanding steadily for nearly three years.
"It's not expanding at such a rapid clip," said Anthony Chan, chief economist at J.P. Morgan Private Client Services in Columbus, Ohio.
"But it's still expanding and would suggest that even though the economy may slow as the year progresses, we should still expect reasonably good economic performance out of the manufacturing sector," he said.
Still, the report said businesses reported "major concerns" over high energy and commodity prices, as the prices paid index reached 71.5 from 66.5.
The new orders component eased to 57.6 from 58.4, while the employment index jumped to 55.8 from 52.5.
While the industrial sector makes up a shrinking slice of the U.S. economy, it is likely to play an important role in supporting the economy this year given an expected slowdown in consumer spending.
Factories are also useful as an indicator of broader economic trends like inflation and productivity, because they behave in cyclically predictable ways.
For this reason, monetary policy-makers track manufacturing trends for signs of inflation pressures.
Both the strong overall level of activity and the spike in prices indicated the Federal Reserve could continue raising interest rates, which hurt government bond prices.