US factory activity jumps to near 3-year high, construction spending flat

US factory activity rose sharply in June to its highest level in almost three years suggesting economic growth in the second quarter gained some steam, while construction spending held steady in May.

The Institute for Supply Management (ISM) said on Monday its index of national factory activity rose to a reading of 57.8 last month, its best performance since August 2014, from 54.9 in May.

A reading above 50 in the ISM index indicates an expansion in manufacturing, which accounts for roughly 12 per cent of the overall US economy.

“The ISM index provides further evidence that the prospects for the manufacturing sector remain bright,” said Andrew Hunter, an economist at Capital Economics.

The reading adds to encouraging signs that the US economy rebounded strongly in the April-- June quarter.

Following the data, the Atlanta Federal Reserve raised its forecast for second-quarter GDP to a 3.0 per cent annualised rate from its previous forecast of 2.7 per cent.

On Friday, the Commerce Department also reported that the US economy grew at a 1.4 per cent annual rate in the first quarter, less slowly than previously estimated.

The ISM survey’s new orders sub-index rose to 63.5 in June from 59.5 the prior month. A measure of factory employment increased to a reading of 57.2 from 53.5 in May.

According to ISM, comments from those surveyed generally reflected expanding conditions, “with new orders, production, employment, backlog and exports all growing in June compared to May and with supplier deliveries and inventories struggling to keep up with the production pace.”