The U.S. manufacturing sector expanded in April though the rate of growth was slightly lower than expected as inventories fell, but factory output growth hit its fastest pace in three years, an industry report showed on Wednesday.

Financial data firm Markit said its preliminary or "flash" U.S. Manufacturing Purchasing Managers Index dipped to 55.4 in April from 55.5 in March. Economists polled by Reuters expected a reading of 56.0.

A reading above 50 signals expansion in economic activity.

The output subindex jumped to 58.2, the highest since March 2011, from 57.5 last month.

"With manufacturing acting as a good bellwether of the rest of the economy, the survey bodes well for further robust economic growth in the second quarter," said Chris Williamson, chief economist at Markit.

"This is a domestic-led upturn," he said. "Faster growth of new orders is being driven by surging demand from U.S. markets."

The new orders subindex rose to 58.9 from 58.1 last month.

Weighing the most on the index, inventories shrank.

Markit's "flash" reading is based on replies from about 85 percent of the U.S. manufacturers surveyed.