US factories continue expanding

US factories saw growth for the second month in a row

The US economic recovery has been bolstered by two pieces of data indicating an improving economy.

Factory activity in the US in March rose to a 23-month high - a reading of 55.6 - according to the Institute for Supply Management (ISM), above analyst estimates of 54.3 and higher than February's 54.7.

A figure above 50 indicates general expansion in the US economy.

The March reading was the second consecutive measure showing improved economic activity, after moving into expansion territory in February.

"The overall picture shows growth in manufacturing activity during March and a strong finish for the first quarter," said Norbert Ore, the ISM business survey chairman.

"The March report certainly validates the turnaround for manufacturing," he said.

"While the growth in production slowed, new orders rose to a very lofty level... last seen in October 1986."

Big increases

During the recent recession, businesses cut back on productivity as a way to reduce inventories. It was the lack of spending on the part of corporations that was partly blamed for the US recession.

Separately, the US government, said construction spending rose 1.1% in February, compared with 0.8% in January.

The rate of increase was the highest since February 2001 and well ahead of analyst predictions of an increase of 0.7%.

February's rise follows January's revised gain of 0.8%, as compiled by the Commerce Department.

Residential building experienced the greatest gains, advancing 3.5% in February, and the largest advance in nearly six years.

"In construction spending, we again saw a big increase, indicating that the construction side of the economy is holding up very well," said Gary Thayer, chief economist at AG Edwards in St Louis.

While economists generally viewed today's numbers as positive, many are awaiting Friday's employment report from the Department of Labor for further evidence of the economy's direction.

Economists expect a small rise in the unemployment rate to 5.6% from the current 5.5%.