Factories Are Humming With Backlogs Building And Hiring On Upswing; But Inflation Signs Also Flash; Plenty of food for thought as FOMC meets today to review policy of "patience'.(A)

Byline: JED GRAHAM

The manufacturing sector continued to charge ahead in April, as a key industry report showed hiring and prices ramping up ahead of a key Federal Reserve meeting.

The Institute for Supply Management's index of factory activity barely dipped to 62.4 in April from 62.5 in March, staying well above the robust 60 level for a sixth straight month. The index has been above 50, which signals growth, for 11 straight months.

"Very strong growth is continuing," said David Wyss, chief economist at Standard & Poor's. The index has reached "a remarkable level for a sustained period of time."

But amid strong growth came more evidence of increased price pressures. Both will be on the minds of Federal Reserve policy-makers when they meet Tuesday to discuss interest rates. No change is expected in the Fed's overnight lending rate, but economists expect the Fed to tweak its language to prepare markets for a likely summer rate hike.

The biggest question is if the Fed will drop its prior stance that it "can be patient" in deciding when to begin raising its key rate from a 46-year low of 1%.

"If the Fed abandons patience tomorrow it will be taken by the markets as a clear signal rates are likely to rise in June unless incoming data are markedly weaker," wrote Ian Shepherdson, chief U.S. economist at High Frequency Economics.