U.S. manufacturing grew last month at the fastest pace in 10 months, suggesting that the economy is healthier than recent data had indicated.
New orders, production and a measure of hiring all rose. The April survey from the Institute for Supply Management was a hopeful sign ahead of Friday's monthly jobs report and helped the Dow Jones industrial average end the day at its highest level in more than four years.
The trade group of purchasing managers said Tuesday that its index of manufacturing activity reached 54.8 in April, the highest level since June. Readings above 50 indicate expansion.
The sharp increase surprised analysts, who had predicted a decline after several regional reports showed manufacturing growth weakened last month. The gain led investors to shift money out of bonds and into stocks.
The ISM manufacturing index is closely watched in part because it's the first major economic report for each month. April's big gain followed a series of weaker reports in recent weeks that showed hiring slowed, applications for unemployment benefits rose and factory output dropped.
"This survey will ease concerns that the softer tone of the incoming news in recent months marked the start of a renewed slowdown in growth," Paul Dales, an economist at Capital Economics, said in a note to clients. "We think the latest recovery is made of sterner stuff, although we doubt it will set the world alight."
The latest reading is well above the recession low of 33.1 and above the long-run average of 52.8. But it's still below the prerecession high of 61.4.
Dan Meckstroth, chief economist at the Manufacturers' Alliance, notes that in the past 20 years, the index has been at or above 54.8 only one-third of the time.
A measure of employment in the ISM's survey rose to a 10-month high. That indicates that factories are hiring at a solid pace.
A gauge of new orders jumped to its highest level in a year. That could signal faster production in the coming months. Export orders also rose.
Factories account for only about 9 percent of total payrolls but added 13 percent of the new jobs last year. Manufacturers have added 120,000 jobs in the past three months, about one-fifth of all net gains.
Still, manufacturing represents only about 12 percent of economic activity. Other areas continue to struggle.
A separate report showed U.S. builders barely increased their spending on construction projects in March after two straight months of declines. A pickup in single-family home construction and commercial projects offset a steep drop in state and local government building.