U.S. manufacturing growth picked up in March as new orders increased and hiring quickened, closing out the best quarter for the sector in two years, a survey showed on Monday.
Financial data firm Markit said its U.S. Manufacturing Purchasing Managers Index rose to 54.6 last month from 54.3 in February. A reading above 50 indicates expansion.
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Output increased, though the rate of growth slipped to 56.6 from 57.3 in February.
Overall, however, the index averaged 54.9 between January and March, above the 52.6 average recorded in the fourth quarter of 2012 and the best quarterly showing in two years, Markit said.
"The sector will have provided a firm boost to the economy in the first quarter, with output possibly growing by as much as 2 percent compared to the final quarter of last year," said Chris Williamson, Markit's chief economist.
Domestic demand grew steadily at the same rate as the prior month, while new export orders increased after contracting slightly in February.
The pace of hiring, however, increased, with the employment sub-index hitting 54.6 compared to 53.5 the prior month. March's pace was swifter than the average for all of 2012.
"It is encouraging to see the upturn generating more jobs, with the survey suggesting that approximately 15,000 extra employees were taken on in the sector in March," Williamson said.
The broader U.S. economy added 236,000 jobs in February as the unemployment rate fell to 7.7 percent, the lowest in more than four years. But economists fear government belt-tightening could slow the labor market's momentum as the year goes on.
Economists polled by Reuters expect government data on Friday to show employers hired 200,000 new workers in March.
(Reporting By Steven C. Johnson; Editing by Chizu Nomiyama)