updated 6/1/2004 11:01:24 AM ET 2004-06-01T15:01:24

U.S. manufacturing activity expanded for the 12th consecutive month in May, and factories boosted employment as the overall economy strengthened, according to a key index released Tuesday.

Major Market Indices

The Institute for Supply Management said its manufacturing index advanced to 62.8 in May from 62.4 percent in April. The latest reading was above the 61.5 reading that analysts had expected.

Any index reading above 50 indicates expansion, while one below 50 indicates that manufacturing activity is contracting.

In Washington, meanwhile, the Commerce Department said construction spending registered its best month on record in April. The department said the value of buildings put in place rose 1.3 percent in April from March to a seasonally adjusted annual rate of $970.4 billion, the highest level on record.

Norbert J. Ore, who heads the supply management group’s survey committee, said the manufacturing sector “grew at a faster rate in May, continuing its recent strong performance.”

He noted that the rate of growth in the closely watched new orders and production categories “slowed slightly,” but added that this “was offset by a significant increase in employment.”

Many economists have been expecting some slowdown in factory output as the economy reacts to higher oil prices and the likelihood that the Federal Reserve will raise interest rates later this year to stem any sign of inflation.

The employment reading of 61.9 for May was the highest since a 62.6 reading registered in April 1973, the group said. The employment reading in April had been 57.8.

New orders eased to 62.8 in May from 65.0 in April, while production fell to 64.8 in May from 67.0 in the previous month.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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