US manufacturing grows at fastest pace since June

Manufacturing grew in April at the fastest pace in almost a year, propelled by a pickup in orders that signalled factories will remain a source of strength for the US expansion.

The Institute for Supply Management's factory index climbed to 54.8 last month, exceeding the most optimistic forecast in a Bloomberg News survey and the best reading since June, the Tempe, Arizona-based group's report showed on Wednesday. Readings greater than 50 signal growth.

The world's largest economy may pick up after slowing in the first three months of the year as the increase in bookings indicates American assembly lines will keep churning out more goods. Combined with a report showing manufacturing in China also accelerated, the figures sent the Dow Jones Industrial Average to the highest level since 2007 as the data eased concern global growth was slackening.

Manufacturing "continues to be a bright spot in the recovery", said Ellen Zentner, a senior US economist at Nomura Securities International Inc in New York. "We have yet to see a drop-off in foreign demand for US-manufactured goods, and that comes despite all the concerns of a slowdown in the global economy."

The Dow gained 0.5% to close at 13,279.32 at the close in New York. The yield on the benchmark 10-year Treasury note rose to 1.95% from 1.91% late on Tuesday.

Elsewhere, China's manufacturing expanded for a fifth month in April to reach the highest level in a year. The news wasn't universally good as a UK manufacturing index fell more than forecast in April as export orders fell the most since May 2009.

SURVEY RESULTS

The median forecast in a Bloomberg News survey of 79 economists projected the ISM index would drop to 53 from a reading of 53.4 in March. Estimates ranged from 52 to 54. The gauge averaged 55.2 in 2011 and 57.3 a year earlier.

The group's orders gauge climbed to the highest level in a year, while its production measure put it its best performance since March 2011 and employment advanced to a 10-month high, Wednesday's report showed. The group's export index also improved. "We seem to have good, strong order books filling up for the next few months, and that bodes well," Bradley Holcomb, chairman of the ISM's factory survey said in a telephone interview. "Things are moving forward and moving forward at a good sustainable level, not indicating at this point any slowdowns."

INDUSTRIAL DEMAND

3M Co, the maker of fuel system tune-up kits and Post-it Notes, posted first-quarter profit that beat analysts' estimates because of rising US auto and industrial demand. The St Paul, Minnesota-based company's industrial and transportation unit posted sales of $2.66 billion, an 8.6% increase.

At the same time, other areas may not be helping to support manufacturing in coming months. Business spending on equipment and software in the first quarter rose at the weakest in almost three years, a commerce department report showed last week.

Overseas demand for US made-goods also risks fading as global growth slows. Spain's economy contracted in the first quarter, putting the euro region's fourth-largest economy into its second recession since 2009.