by Devin Dwyer

The U.S. manufacturing sector contracted further in April but at a slower rate than in March — a sign the economy could be stabilizing.

The ISM Purchasing Managers' Index — a composite survey of executives on changes in new orders, production, employment, inventories, and prices — rose to 40.1 in April from 36.3 in March. A reading below 50 indicates contraction.

Economist Ian Shepherdson with High Frequency Economics predicts the index will continue to rise, hitting the 44 mark by June or July.

"That's immensely significant," he says, "because 44 is consistent with stable GDP." Shepherdson is quick to add, however, that "there are still deep problems in the economy."