The recession is said to be losing its strength as the reports on Monday show that the U.S. manufacturing sector showed improvement in May, contracting at a slower rate for the fifth straight month, while consumer spending slipped only slightly in April. The figures led the U.S. stocks up by over 2.5%.

According to the Institute for Supply Management index of national factory activity rose to 42.8 last month from 40.1 in April. The figures are the highest since September. A reading under 50 indicates contraction.

Apart from this the Commerce Department reported that consumer spending fell by 0.1% in April less than expected by the market. It is compared to 0.3% drop in March. Another report of the Commerce Department showed that spending on construction projects increased 0.8% in April from March, the biggest increase since August.

"The data provide a clear signal that the worst of the troubles in the economy appear to be behind us," said Joseph Brusuelas, an economist at Moody's Economy.com in Westchester, Pennsylvania.

"With the job market looking to have stabilized, all the necessary factors for a second-half recovery are beginning to fall in place."