NEW YORK -- Activity at the nation's factories increased for a 20th consecutive month in January but the pace of expansion eased, reflecting sustained, moderate growth in the overall economy.
The Institute for Supply Management said yesterday that its index measuring manufacturing activity declined to 56.4 in January, from a revised reading of 57.3 in December. The January figure was slightly below the reading of 57 anticipated by analysts.
Although the index declined, the fact that it remained above 50 indicates the sector continued to grow last month, but at a somewhat slower pace. A reading of 50 or above in the index means the manufacturing sector is expanding, while a figure below 50 represents a contraction.
Economists said the reading shows the manufacturing sector continues to expand. But the growth is gradual, with the pace of new orders to plants slowing, despite a weak dollar that makes US goods more competitive overseas.
In other economic news, the Commerce Department said construction spending jumped by 1.1 percent in December, making last year the best for building activity since 1996. The December increase was the sector's best showing in eight months, a sign of robust activity in both private and public sector building projects.
Total private residential activity rose by 14 percent to $542.7 billion last year, the biggest increase in a decade.
Stock prices rose following release of the reports. The Dow Jones average gained 62 to 10,551.94 and the Nasdaq Composite rose 6.29 to 2,068.70.
The January index increase reflects strength both in manufacturing and in the broader economy. But that growth is moderating, a sign the nation's factories will not soon be supplying substantial numbers of new jobs or the impetus for much larger paychecks, said John Silvia, chief economist for Wachovia Corp.
That continuation in moderate growth sets the stage for Federal Reserve policy makers to continue gradually raising interest rates, economists said. The Fed's open market committee is widely expected to raise interest rates by a quarter-point today.