The Associated Press

NEW YORK - The manufacturing sector continued to rebound strongly in March, an industry group reported Thursday, raising the prospect of more hiring at the nation's factories.

The Institute for Supply Management said its manufacturing index registered 62.5 in March, compared with a reading of 61.4 in February. The new reading was above the expectations of analysts, who had forecast a figure of 59.5.

An index reading above 50 indicates expansion, while one below 50 indicates that manufacturing activity is contracting.

The ISM report, and another by the Labor Department Thursday showing new claims for unemployment benefits declined slightly last week, suggest the job market may be improving, setting the stage for the government's release of March employment figures this morning.

"Almost all the indicators ... point to a healthy rebound in manufacturing, which has been the Achilles heel for the economy in the past three years," Sung Won Sohn, chief economist for Wells Fargo & Co., said.

Analysts said the ISM report shows the manufacturing sector has sustained momentum, with new orders strong, backlogs of orders increasing and production ramping up.

Also Thursday, government reports showed that:

• New claims for unemployment benefits edged down last week by a seasonally adjusted 3,000 to 342,000.

• Construction spending dipped 0.1 percent in February, following a 0.8 percent decline the month.

• Wholesale prices moderated in February, edging up 0.1 percent after a sharp 0.6 percent rise in January.