WASHINGTON - New reports Tuesday on construction spending and manufacturing showed that the economic recovery is gaining strength, easing fears that Europe's debt crisis might be starting to stunt the rebound in this country.
Construction spending rose by the most in nearly a decade, the Commerce Department said, while manufacturing activity expanded for the 10th straight month, an industry group said.
"The recovery is still on track," said Brian Bethune, a senior economist at IHS Global Insight. While Europe's troubles will put a drag on profits at U.S. companies that do business overseas, Bethune said, "it's not going to be a showstopper."
The burst in April construction spending sent a promising signal for an industry that was among the hardest hit during the recession. The 2.7 percent increase was spread across all major sectors. But temporary government incentives fueled gains in two of three major categories, a reminder that the economy will eventually have to manage with less federal support.
In the other report, the Institute for Supply Management, a trade group of purchasing executives, said its manufacturing index dipped only 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 in manufacturing activity. Export orders rose despite Europe's troubles.
The group's employment index, which measures employers' willingness to hire, rose 1.3 percent. That was the highest level since May 2004. New orders, a gauge of future production, were unchanged.
"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.
Expiring tax credits for first-time homebuyers helped drive the 4.4 percent rise in home-construction spending. And portions of last year's $787 billion stimulus package boosted government building 2.4 percent.