WASHINGTON — Manufacturing activity grew for the 21st straight month in April, fueled by a weak dollar that has made U.S. goods cheaper overseas. But the cost of raw materials rose for the fifth consecutive month, a growing concern for many companies.
The Institute for Supply Management, a trade group of purchasing executives, said Monday that its index of manufacturing activity dipped to 60.4 in April.
That’s down slightly from March and February, the fastest month for expansion in nearly seven years. A reading above 50 signals growth.
Since the beginning of the year, manufacturing has grown at the fastest pace in 27 years, said David Resler, an economist at Nomura Securities.
The index has topped 60 for four straight months, evidence that manufacturing remains one of the strongest components of the economy.
The index bottomed out during the recession at 33.3 in December 2008, the lowest point since June 1980.
“This is another solidly encouraging report from the manufacturing sector,” Resler said in a note to clients. “That sector’s growth will help keep the economic expansion on a moderate … growth trajectory.”
Factory growth also helped lift construction spending in March. The 1.4 per cent rise followed three monthly declines and was the biggest gain since April, the Commerce Department said. A 5.5 per cent increase in spending on factory expansion and construction drove commercial construction spending gains. Growth in home-improvement projects lifted residential construction.
Factories have benefited from growing overseas demand for machinery and other goods. And U.S. consumers have spent more this year on autos, appliances and computers
Export orders rose sharply last month, the ISM survey found. The dollar has fallen eight per cent this year against a basket of six other currencies.
A major reason for the weak dollar is the Federal Reserve has kept short-term interest rates at record low levels near zero.