Manufacturing in New York state rose in March to a nine-month high, while prices paid also accelerated in another sign inflation is starting to build.

The New York Federal Reserve's report on Tuesday showed its Empire State general business conditions index rose to 17.50 from 15.43 the month before and topped a Reuters forecast of 17.00. It was the highest level since June 2010.

But the new orders and shipments indexes both declined, suggesting there was some underlying weakness.

Manufacturing is running strong right now, but we may be turning the corner, given the moderation in Asia, especially China, said Yelena Shulyatyeva, U.S. economist at BNP Paribas in New York.

New orders have moderated quite a lot. It's sending a weaker signal about manufacturing than what the headline number suggests.

The new orders index fell to 5.81 from 11.80, while shipments declined to 1.62 from 11.31.

The prices paid index rose to 53.25, the highest level since August 2008, from 45.78. Prices received also rose as manufacturers passed along costs.

Employment gauges showed expansion. The index for the number of employees rose to 9.09 from 3.61 in February, and the average employee workweek index was up at 15.58 from 6.02.

The index of business conditions six months ahead was little changed at 49.35 compared to 49.4 in February. The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions.

A separate report showed U.S. import prices rose for the fifth consecutive month in February as political turmoil in the Middle East helped pushed oil prices higher. For details, see [ID:nN15228403]

Inflation concerns recently have come to the forefront on worries that rising energy and commodity prices could temper the economic recovery.

U.S. stock index futures and bonds were little changed following the data as investors focused on the fallout from the natural disaster and nuclear crisis in Japan.

Investors will also be watching a statement from the Federal Reserve later on Tuesday. The central bank looks set to hold monetary policy steady and will likely nod to recent improvement in the economy.

(Reporting by Leah Schnurr; Additional reporting by Richard Leong in New York and Doug Palmer in Washington; Editing by Padraic Cassidy)

China Japan BNP Paribas Inflation