Manufacturing index hits six-month high

NEW YORK (Reuters) - Manufacturing grew at its fastest pace in six months in December, capping a late-year upswing, but a European slump and rising oil prices posed threats to the U.S. economy in the new year.

The Institute for Supply Management's index of national factory activity hit its highest level since June, coming in above forecasts at 53.9, more evidence that the U.S. economy picked up steam in the fourth quarter.

A reading above 50 indicates expansion.

A rise in new orders for manufactured goods suggested momentum going into 2012, Tuesday's report showed.

"It's a pretty decent report overall," said Tom Porcelli, chief U.S. economist at RBC Capital Markets in New York. "We're not roaring ahead here, but it's also not collapsing. That's consistent with our overall view of the economy in 2012."

The data contrasted with the state of manufacturing in much of the rest of the world. The euro zone's industrial sector ended 2011 with a whimper, posting its fifth consecutive month of contraction. Asian factories also closed out the year on a weak note.

In Britain, December capped the worst quarter for manufacturing in more than two years.

Economists expect growth in the U.S. economy accelerated between October and December, improving on the 1.8 percent rate recorded over the prior three months. Macroeconomic Advisers forecast a 3.5 percent rate of growth in the fourth quarter.

Another report on Tuesday showed U.S. construction spending neared an 18-month high in November.

U.S. stocks rose after the U.S. data, with the Dow and S&P 500 indexes up about 1.7 percent each.