U.S. manufacturing activity rose in May according to a survey released today.

The Institute for Supply Management said its index of national factory activity rose to 62.8 in May from 62.4 the prior month. Economists had expected the index of manufacturing activity to inch down to 62.0 from April’s reading of 62.4. Readings over 50 indicate expansion.

The yearlong stretch of strong growth helped power the ISM’s employment index to 61.9 in May — the highest since April 1973 — from 57.8 the prior month. But after shedding nearly 3 million jobs for more than three years, the factory sector has a long way to go to recover all the jobs lost.

U.S. factory performance may have moderated slightly in May, but new orders and hiring probably picked up, suggesting the manufacturing sector is still expanding healthily, analysts say.

Within the report, the new-orders index slipped from 65.0 in April to 62.8 in May, while the production index fell to 64.8 from 67.0. While the prices-paid index slipped slightly to 86.0 from 88.0 in April, the ISM noted that survey respondents cited rising prices as a “major concern.”

Businesses continued to bulk up their stockpiles, the survey found, as the inventories index jumped from 44.8 in April to 49.3 in May.

Meanwhile, U.S. spending on total construction increased 1.3% in April, estimated at a seasonally adjusted annual rate of US$970.4 billion, the Commerce Department said Tuesday.

The advance followed an upwardly revised 2.4% increase in March. Spending for that month was originally estimated as rising 1.5%.

Wall Street was expecting a 0.5% increase in April outlays.

The US$970.4 billion figure was an all-time high, the Commerce Department said.

The report showed residential construction rose 1.2% at a seasonally adjusted annual rate of $526.5 billion. Spending in March went up 1.4%.

Private construction spending went up 1.2%. Private construction includes houses, office buildings, factories and hospitals.

Residential private construction rose 1.2% at a rate of $520.7 billion. Non-residential private construction went up 1.3% to a $219.2 billion annual rate.

Spending on public construction grew 1.7% in April to a rate of $230.5 billion, the Commerce Department said. The category includes roads, sewer systems and schools. Federal government outlays climbed 7.9%, while state and local spending rose 1.2%.

Year over year, total construction spending was 11.3% higher compared to April 2003.