WASHINGTON (Reuters) - The U.S. manufacturing sector showed improvement in May, contracting at a slower rate for the fifth straight month, while consumer spending slipped only slightly in April, according to reports Monday that offered more proof the deep recession is losing its bite.
The data drove U.S. stocks up more than 2.5 percent.
The Institute for Supply Management's closely monitored index of national factory activity rose to 42.8 last month from 40.1 in April. It was the highest reading since September; a reading under 50 indicates contraction.
Separately, the Commerce Department said consumer spending slipped 0.1 percent in April, less than market expectations, after a 0.3 percent fall in March. Spending on construction projects rose 0.8 percent in April from March, the biggest increase since August.
"The data provide a clear signal that the worst of the troubles in the economy appear to be behind us," said Joseph Brusuelas, an economist at Moody's Economy.com in Westchester, Pennsylvania.
"With the job market looking to have stabilized, all the necessary factors for a second-half recovery are beginning to fall in place."
Government bond prices sagged as the data cut safe-haven buying and briefly pushed the yield curve, the gap between two-year and 10-year Treasury notes, to match the previous record high of 275 basis points, from 254 basis points on Friday.
The sell-off was exacerbated by aggressive selling by mortgage players in response to a recent spike in home loan rates, which could hurt recovery prospects for an economy now in its 18th month in recession. more...
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