ISM: Factory Activity Expanded at Faster Rate

The U.S. manufacturing sector expanded at a faster-than-expected pace in June, as new orders to factories picked up, a private research group reported Friday.

Activity at the nation's factories increased for a 25th consecutive month, according to figures from the Institute for Supply Management (search). The June upturn followed six consecutive months of slowing growth in the sector, the group said.

ISM's manufacturing index registered 53.8 percent in June, up from a reading of 51.4 in May. The new reading was notably higher than the 51.5 figure forecast by analysts.

A reading of 50 or above in the index means the manufacturing sector is expanding. A figure below 50 represents a contraction.

"These are the most positive signs that we have seen in several months, and they indicate that we may be through the 'soft patch' that many observers touted," said Norbert J. Ore, chair of ISM's manufacturing business survey committee.

The reading reflects an increased rate of growth in new orders, and a slowing rise in prices paid by manufacturers for raw materials. At the same time, high energy costs and a strong dollar continue to weigh on the sector, ISM said.

Of the 20 industry sectors tracked by the group's survey, 13 reported growth in June, including petroleum, textiles, food, wood and wood products, furniture, instruments and photographic equipment, industrial and commercial equipment and computers, rubber and plastic products, chemicals, electronic components and equipment, printing and publishing and primary metals.

In a second economic report released Friday, the Commerce Department (search) said construction spending fell by 0.9 percent in May, the third consecutive monthly decline.

The drop to a seasonally adjusted annual total of $1.1 trillion surprised economists, who had been forecasting a rebound in construction of 0.5 percent.