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 The data on Tuesday painted an upbeat picture for the second quarter
and underscored the strength in the economy heading into the last
half of the year.
"We come away from these reports with a higher level of conviction
that the U.S. economic recovery is strengthening," said Millan
Mulraine, deputy chief economist at TD Securities in New York.
The Institute for Supply Management said its index of national
factory activity for June was at 55.3, little changed from May's
55.4 reading. A figure above 50 indicates expansion.
Notably, a gauge of new orders hit a six-month high in a good omen
for business capital spending, which appeared to struggle during the
first half of the year.
From transportation equipment to machinery and computer and
electronic products, manufacturers were quite bullish in their
assessment of business conditions.
"It's all very constructive. The second half of the year should look
much, much better for capex (capital expenditure) investment," said
Jacob Oubina, senior U.S economist at RBC Capital Markets in New
York.
In a separate report Autodata Corp said auto sales increased 1.2
percent to a seasonally adjusted annual pace of 16.98 million units
last month, the highest rate since July 2006.
The increase came even though there were two fewer selling days than
a year ago.
Most major automakers beat expectations, and sales at the
top-selling manufacturer in the U.S. market, General Motors Co <GM.N>,
rose 1 percent despite its ongoing safety crisis. Analysts had
expected GM's sales to fall 6 percent.
The reports reinforced views the economy has rebounded after a
weather-induced slump and helped push up U.S. stock prices, with the
S&P 500 <.SPX> closing at a record high. Prices for U.S. Treasury
debt fell, while the dollar was little changed against a basket of
currencies.
NOT ALL ROSY
But it was not all good news. The ISM survey showed weak export
orders and a jump in imports, indicating trade would again be a drag
on growth in the second quarter.
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The economy contracted at a 2.9 percent annual pace in the first
three months of the year, undercut by the weather and a slow pace of
inventory accumulation by businesses. Second-quarter growth
forecasts, in contrast, range as high as a 3.5 percent pace.
In another report, the Commerce Department said construction
spending edged up 0.1 percent in May after rising by 0.8 percent the
prior month.
A 0.3 percent drop in private construction, which represents more
than two-thirds of construction spending, largely offset a 1.0
percent rise in public construction.
While private residential construction tumbled 1.5 percent,
economists were little concerned, pointing to recent data suggesting
the housing market recovery was back on track.
Construction spending by the federal government dropped 8.9 percent,
the largest fall since December 2010. State and local government
spending, however, increased 2.0 percent.
(Reporting by Lucia Mutikani; Additional reporting by Ryan
Vlastelica in New York.; Editing by Paul Simao)
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