U.S. factories slowed the pace of their output slightly in April but hired more workers, while an index of prices that companies pay for materials hit a near 25-year high, the Institute for Supply Management said Monday.

The ISM said in its monthly survey that its manufacturing index edged down to 62.4 in April from March’s 62.5. Economists had forecast a rise to 63.0.

A reading above 50 shows expansion. It was the 11th consecutive month of expansion in the sector, which accounts for less than a fifth of the U.S. economy. In January, the index stood at a two-decade high at 63.6.

Economists said that despite the slight decline, the index is well above its 50 break-even level. That’s an indication the U.S. manufacturing sector continues to march back to health, said Gillian Manning, economist with TD Bank Financial Group.

ISM said in a statement, said the employment component of the index rose for a sixth-consecutive month, to 57.8 from 57.0 in March. The employment index remains at its highest level since December 1987, ISM data show. “The index was strong in March. It is still strong in April. That suggests we have not lost any momentum in the economy,” Chris Low, chief economist at FTN Financial in New York told Reuters news agency.

“The employment rise is not necessarily a dramatic change. It is a small improvement on the back of three consecutive previous gains. It suggests continued improvement on the jobs front,” Low added.

ISM said its prices paid component rose to 88.0 in April — the highest level since November 1979 — from 86.0 in March. Manning said the uptick “will likely stock further speculation about a shift in the Fed’s stance on rates.”

Manning said in a report that the combination of rapid output growth, rising prices and stronger labour markets “makes a strong case for the Fed to begin
rebalancing monetary policy.” It expects the tightening to begin in August, and expects the Fed to give some signal as to timing in Tuesday’s statement.

BMO Nesbit Burns Inc. chief economist Sherry Cooper said the surveys shows that production and employment continue to improve for the U.S. manufacturing sector, and the broader economy. “Meanwhile, inflation pressures continue to mount. No doubt this will be high on the agenda at tomorrow’s FOMC meeting,” she said in a report.

The ISM index is compiled from monthly responses by purchasing executives at more than 400 industrial companies, ranging from textiles and chemicals to paper and computers.

A separate report from the Commerce Department showed that U.S. construction spending surged more than expected in March to a record high. Construction spending rose 1.5 percent compared to a 0.4 percent increase in February. Economists had forecast a rise of 0.5 percent.