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U.S. factory sector growth slows in March

File photo of a Ford employee working on the line in Chicago.

M. Spencer Green/AP

U.S. factory activity slowed in March as new orders weakened, but a rebound in construction spending in February was another sign of faster economic growth in the first quarter.

The Institute for Supply Management said on Monday its index of national factory activity fell to 51.3 last month from 54.2 in February. A reading above 50 indicates expansion in the manufacturing sector.

The report was at odds with other data showing growth in the nation's factories picked up in March on strong orders, closing out the best quarter for the sector in two years.

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Financial data firm Markit said its U.S. Manufacturing Purchasing Managers Index rose to 54.6 last month from 54.3 in February. A reading above 50 indicates expansion.

While the two surveys use the same sub-indexes, they give different weights to the components.

"Hopefully this is an anomaly. This gives a pause in the recent bullish data we have been seeing," Craig Dismuke, chief economic strategist at Vining Sparks in Memphis, Tennessee.

Despite tighter fiscal policy, data on employment, consumer spending and factory activity have been relatively strong, leaving economists scrambling to raise their forecast.

That run of strong so-called real data, which has left first-quarter GDP growth estimates ranging as high as a 3.5-per-cent annual rate, continued on Monday.

The Commerce Department reported construction spending advanced 1.2 per cent to an annual rate of $885.1-billion (U.S.) in February. Spending had declined 2.1 per cent in January.

The construction report added to a series of other data that have suggested economic growth accelerated in the first quarter from the fourth quarter's anemic 0.4-per-cent annual pace.

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Construction spending in February was boosted by a 1.3-per-cent rise in private construction projects. Spending on private residential projects increased 2.2 per cent to the highest level since November 2008.

Part of the increase reflected renovations. The housing market is no longer a drag on the economy and residential construction contributed to growth last year for the first time since 2005. It is expected to do so again this year.

Spending on private nonresidential structures rose 0.4 per cent after declining 5.9 per cent.

Public sector construction spending increased 0.9 per cent, rising for a second straight month. Outlays on federal government projects fell 1.1 per cent.

However, state and local spending, which is far larger than federal projects, rose 1.1 per cent. It was the second straight month of gain in state and local government outlays.

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