WASHINGTON – The economic recovery gained strength in recent months on the biggest rise in construction spending in nearly a decade and the 10th straight month of expansion for the manufacturing sector.
Temporary government incentives fueled most of the construction spending increases in April. Industry spending rose 2.7 percent with gains in all major sectors, the Commerce Department said Tuesday.
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In a separate report Tuesday, the Institute for Supply Management, a trade group of purchasing executives, said its manufacturing index dipped slightly in May from a nearly six-year high in April. But the 59.7 reading for May was well above the 50 level that indicates expansion.
Export orders rose last month despite the debt crisis in Europe that threatens to spread.
“The European fiscal crisis doesn’t appear to have harmed the prospects of U.S. manufacturers, at least not yet,” wrote Paul Ashworth, senior U.S. economist with Capital Economics.
The news temporarily cheered Wall Street as the two reports erased early losses. The Dow Jones industrial average rose about 40 points in midday trading before stocks fell more than 100 points on news about the BP oil spill.
Construction spending was boosted by a homebuyer tax credit, which helped residential construction surge 4.4 percent in April. The tax credit expired at the end of April, and experts predicted the spike in activity would decline.
Government spending also rose on the strength of federal support. The 2.4 percent increase was aided by the economic stimulus program that Congress passed in February 2009. State and local spending jumped 2.3 percent and federal spending rose 2.9 percent.
The other major sector, nonresidential construction, climbed 1.7 percent, the first advance since March 2009.
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