WASHINGTON -- Construction spending registered its best month on record in March, but manufacturing growth slowed a bit in April, weighed down in part by higher costs for materials.
The Commerce Department reported Monday that the value of buildings put in place jumped by 1.5 percent in March from February to a seasonally adjusted annual rate of $944.1 billion, the highest level on record.
The performance was three times bigger than the 0.5 percent increase that some economists were calling for and the gains were fairly broad based. The report also provided further evidence that the construction and housing market in the United States are in good shape. The value of residential projects being worked on by private builders clocked in at an annual rate of $507.2 billion in March, also an all-time monthly high.
In a second report, the Institute for Supply Management said its manufacturing index registered 62.4 in April, compared with a reading of 62.5 in March. The new reading was below the expectations of analysts, who had forecast a reading of 62.7.
An index reading above 50 indicates expansion, while one below 50 indicates that manufacturing activity is contracting.
The institute said that the April figure still means the economy is growing, but companies responding to its survey said that higher prices of certain commodities, such as aluminum and steel, were causing some difficulties. The ISM's prices index came in at 88 percent, 2 percentage points higher than in March. It was the 26th consecutive month the index has increased.
In the construction report, the 1.5 percent increase for March came after a modest 0.4 percent rise in February, according to revised figures. That was better than the 0.1 percent dip previously reported for February. January's figure also was revised to show a 0.4 percent drop in spending, not as deep as the 0.8 percent decline previously estimated.
The economy grew at a healthy 4.2 percent annual rate in the January-to-March quarter of this year. Economists believe business growth will be even better in the current quarter, with estimates in the range of around a 4.5 percent to 5 percent pace.
Although the economic recovery is gaining traction, the labor market - which has shown improvements - needs to build on those and get stronger, economists say.
Against that backdrop, Federal Reserve Chairman Alan Greenspan and his colleagues are widely expected Tuesday to hold a key short-term interest rate at 1 percent, where it has been since last June. Greenspan recently told Congress that ultra-low short term rates, now at a 46-year low, must rise at some point to keep inflation in check, but he didn't say when that might be.
A growing number of economists believe the Fed will begin to raise rates this summer. Some, however, don't think rates will move higher until 2005.
The 1.5 percent increase in construction spending in March marked the largest monthly gain since a 1.6 percent advance posted in July 2003.
The strength in March not only represented brisk spending by private builders on residential and other projects but also stronger investment by government on public works. Spending by state and local governments on construction projects rose to a rate of $205.1 billion in March, also the highest monthly level on record.