Manufacturing in U.S. expanded at a faster pace in March

April 2 (Bloomberg) -- Manufacturing in the U.S. expanded at a faster pace than forecast in March, a sign the industry is weathering slower global growth.

The Institute for Supply Management’s factory index climbed to 53.4 last month from 52.4 in February, the Tempe, Arizona- based group’s report showed today. Readings greater than 50 signal growth. The median forecast in a Bloomberg News survey called for a gain to 53. Production accelerated to a three-month high and a gauge of factory employment climbed to the highest level since June.

Increased auto sales, sustained corporate purchases of equipment and inventory rebuilding are underpinning the industry that led the U.S. out of recession more than two years ago. At the same time, less demand from overseas customers remains a risk to factories, which account for about 12% of the economy.

“Manufacturing is going to continue to help boost economic growth,” said Omair Sharif, an economist at RBS Securities LLC in Stamford, Connecticut, who correctly forecast the gain in the index. “We’ve got a bit of a slowdown globally that is affecting exports, but for the most part there’s pretty healthy demand for U.S.-made products.”

Stocks erased losses after the figures, with the Standard & Poor’s 500 Index climbing 0.2% to 1,411.4 at 10:32 a.m. in New York. The yield on the benchmark 10-year Treasury note fell to 2.18% from 2.21% on March 30.

Construction Spending

Growth in manufacturing is helping make up for weakness in construction spending, which unexpectedly fell 1.1 percent in February, Commerce Department figures showed. The drop was the biggest in seven months and followed a 0.8 percent retreat in January that was larger than first estimated.

Forecasts in the Bloomberg survey of 72 economists ranged from 51.7 to 54.5. The ISM index averaged 55.2 in 2011 and 57.3 a year earlier. Economist estimates ranged from 51.7 to 54.5, according to a Bloomberg survey.

The ISM’s production index rose to 58.3 from 55.3. The new orders measure decreased to 54.5 from 54.9, while the gauge of export orders decreased to 54 from 59.5.

The employment gauge climbed to 56.1 from 53.2 in the prior month.

The index of prices paid was little changed at 61 after 61.5 in February.

Order Backlogs

The measure of orders waiting to be filled was little changed at 52.5 after 52. The inventory index rose to 50 to 49.5, while a gauge of customer stockpiles decreased to 44.5, a three-month low, from 46. A figure higher than 50 means manufacturers are building stockpiles.

Elsewhere, euro-region manufacturing contracted for an eighth month in March, adding to signs the 17-country economy continued to shrink in the first quarter.

The factory gauge, based on a survey of purchasing managers, fell to 47.7 from 49 in February, London-based Markit Economics said today.

U.K. manufacturing growth unexpectedly accelerated in March to the fastest in 10 months, according to another report. The gauge of factory output, based on a survey by Markit Economics and the Chartered Institute of Purchasing and Supply, rose to 52.1 from a revised 51.5 in February, Markit said.

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