U.S. factory orders surged in March, posting a fifth straight monthly increase that showed a healthy manufacturing sector well placed to support economic recovery.

The Commerce Department said on Tuesday new orders for manufactured goods rose 3 percent to a seasonally adjusted $463 billion, well above Wall Street economists' forecasts for a 1.9 percent pickup.

In addition, February orders that had been reported as dropping by 0.1 percent were sharply revised to instead show a 0.7 percent increase.

Ian Lyngen, senior government bond strategist at CRT Capital Group in Stamford, Connecticut, called it a solid report with lingering weakness from early in the first quarter.

A cheaper U.S. dollar has helped export industries and there are signs that producers are boosting investment in plants and equipment to benefit from it.

Orders for costly durable goods, items designed to last three years or more, were up 2.9 percent in March, the department said, an upward revision from a 2.5 percent gain it had earlier reported.

CARMAKERS BUSY

Further underscoring the sweet spot in which U.S. factories find themselves, Detroit-based General Motors Co reported that sales of new cars and trucks jumped 26 percent in April.

Auto sales are an early harbinger of consumer demand and GM's performance, as the biggest seller, implies the industry is off to a strong spring sales season.

Consumers seemed in a spirit to spend more, judging from MasterCard Inc's 24 percent jump in first-quarter profits. The company's chief executive, Ajay Banga, reported solid volume and processed transaction growth -- meaning that consumers swiped their cards to make purchases more often.

Financial markets still digesting global developments like the weekend killing of Osama Bin Laden largely ignored the positive economic signs. Stock prices trod water, the dollar briefly rose but then settled back and Treasury prices were flat as investors pondered strategy in an environment of prolonged low U.S. interest rates.

In addition, this week's main economic event is yet to occur on Friday, when the government issues employment data for April that is expected to show a modest 186,000 new jobs were created that month.

An April jobs figure significantly outside that number could trigger a sharp reaction as investors position themselves ahead of the official release.

INVESTMENTS GAIN

The factory orders report implied that businesses anticipate continuing expansion and were preparing for it.

Orders for nondefense capital goods excluding aircraft -- often taken as an indicator of businesses' future investment plans -- were revised to show a 4.1 percent rise in March instead of a 3.7 percent gain. That followed a 0.9 percent increase in February.

It was the strongest rise in investment plans since a 5.1 percent increase last August.

Excluding volatile transportation goods, March factory orders climbed by 2.6 percent following a 0.6 percent February rise -- an eighth straight gain in this key orders category.

Orders for primary metals, machinery and electrical equipment all were higher in March though orders fell for fabricated metal products and computers.

The robust orders report fit with other recent signs that factories are in a position to bolster recovery from the recession that followed the 2007-2009 financial crisis, provided that costs for energy and other necessary inputs are controlled.

On Monday, the Institute for Supply Management said its gauge of factory activity eased to 60.4 in April from 61.2 in march -- still a brisk level since any reading over 50 shows business is expanding.

Economists at Wells Fargo Securities noted that factory orders have been lagging the strong sentiment figures in the ISM and regional manufacturing surveys.

The strong gains in factory orders for March help to close that gap and will help solidify the (Federal Reserve's) belief that the U.S. manufacturing sector remains on a solid and self-sustaining expansion path despite headwinds from higher energy costs, they said in a report.

Unfilled factory orders increased in March by 0.8 percent after a 0.7 percent February rise, implying that factories should stay busy. Shipments of finished goods increased 2.7 percent in march, well ahead of February's 0.6 percent rise.

(Additional reporting by Ellen Freilich in New York, Bernie Woodall and Ben Klayman in Detroit; Editing by Andrea Ricci)

Manufacturing