US manufacturing keeps forward momentum in March: Reports

An employee works on the assembly line installing parts on the Duratech 35 V6 engine at the Ford Motor Co. Engine Plant in Lima, Ohio.
Ty Wright | Bloomberg | Getty Images

U.S. manufacturing growth accelerated for a second straight month in March, an industry report showed on Tuesday, as production recovered though employment growth slowed.

The Institute for Supply Management (ISM) said its index of national factory activity rose to 53.7 in March, which was up slightly from February's read of 53.2 but below the median forecast of 54.0 in a Reuters poll of economists.

Readings above 50 indicate expansion in the sector.

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The report remains below November's recent peak reading of 57, which was the highest read since April 2011. Gains in the month came alongside a rebound in the production subindex, which jumped to 55.9 from 48.2, ending a three-month string of slowing growth. The forward-looking new orders index rose to 55.1 from 54.5.

There were some cautionary notes, as the employment index fell from 52.3 to 51.1, the weakest read for the index since June 2013. Analysts were expecting a reading of 52.8 in the employment index.

US manufacturing resurgence is for real
US manufacturing resurgence is for real

A separate report from financial data firm Markit showed U.S. manufacturing activity slowed in March after nearing a four-year high in February. However, the rate of growth and the pace of hiring remained strong, a report from financial data firm Markit showed.

Markit's final U.S. Manufacturing Purchasing Managers Index slipped to from 57.1 in February to 55.5, a reading that was unchanged from Markit's preliminary reading, which was released last week. Readings above 50 indicate expansion.

The latest reading was solidly ahead of the 53.7 January reading, an indication that the impact of harsh winter weather on manufacturing activity was starting to fade. The new orders component fell to 58.1 from 59.6 in February, partly the result of a decline in overseas demand, Markit said.

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Output edged down to 57.5 from 57.8 while firms took on workers for a ninth consecutive month.

The final read on new orders was 0.1 higher than the preliminary read, while the output subindex was unchanged. "The survey indicates that factory output growth has picked up again after the weather-related disruptions seen at the start of the year, presenting policymakers with an encouraging picture of a healthy goods-producing sector,'' said Markit chief economist Chris Williamson.

Most economists expect the harsh winter that enveloped much of the country in January and February have dampened first-quarter growth. The U.S. economy grew at a 2.6 percent rate in the final four months of 2013.

Markit's flash reading is based on replies from about 85 percent of the U.S. manufacturers surveyed.

Construction spending barely budges

Elsewhere, U.S. construction spending barely rose in February as outlays on private residential construction projects recorded their biggest decline in seven months, a sign that severe weather continues to hobble the economy.

Construction spending edged up 0.1 percent to an annual rate of $945.7 billion, the Commerce Department said. Construction spending in January was revised to show a 0.2 percent drop instead of the previously reported 0.1 percent gain. Economists polled by Reuters had forecast construction outlays to be flat in February.

What the pros expect in Q2
What the pros expect in Q2

An unusually cold and snowy winter disrupted economic activity early in the year. Growth in the first three months of this year is expected to have slowed to an annualized pace below 2 percent after the economy expanded at a 2.6 percent rate in the fourth quarter.

Activity, however, is showing signs of accelerating as temperatures warm up, with employment growth, industrial production and retail sales gaining momentum in February.

Construction spending in February was curbed by a 0.8 percent drop in private residential construction projects, which was the largest fall since last July.

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However, a 1.2 percent surge in spending on nonresidential construction projects, which include factories and gas pipelines, lifted overall private outlays to their highest level since December 2008. The decline in private residential construction was led by a 1.1 percent drop in single-family home building.

Public construction spending nudged up 0.1 percent in February, with a 5.8 percent jump in federal government outlays offsetting a 0.5 percent fall in state and local government spending.

By Reuters. CNBC contributed to this report.