Manufacturing, Construction Post Impressive Gains

By John S. McClenahen The manufacturing sector of the U.S. economy grew faster in October than economists generally expected, according to data released Nov. 3 by the nstitute for Supply Management (ISM). The Tempe, Ariz., group's closely watched PMI measure was at 57% last month, 3.3 percentage points higher than its September mark of 53.7% and 1.3 percentage points higher than the 55.7% economists expected. On ISM's index, a figure above 50% indicates that manufacturing generally is growing; a figure below 50% signals contraction. "The manufacturing sector enjoyed its fourth consecutive month of growth as new orders continue to lead the recovery," notes Norbert J. Ore, the chairperson of ISM's manufacturing business survey committee and group director for strategic sourcing and procurement at Georgia-Pacific Corp. New orders in October were at an index mark of 64.3%, up 3.9 percentage points from 60.4% in September. Manufacturing production posted an even larger percentage point gain in October, rising to 62.6% in October, 5.3 percentage points higher than its 57.3% in September. Also worth noting: The employment component of the ISM manufacturing index increased by two percentage points to 47.7% in October from 45.7% in September. "It is just fractionally under the 47.8% level that ISM calculates as the break-even mark between declining and rising payrolls," observes Maury Harris, chief U.S. economist at UBS Investment Research, New York. "The message is that the factory expansion continues to gather momentum," says Harris. Meanwhile, the U.S. Commerce Department reported that construction in September was put in place across the U.S. at a seasonally adjusted annual rate of $910.6 billion, 1.3% above the revised August figure of $898.8 billion. September's gain was a full percentage point higher than the 0.3% economists generally expected. "The strength in construction spending extended beyond the usual residential component . . . to encompass non-residential spending, too," Harris stresses. "All in all, the construction data would be consistent with a 0.3% upward revision to [third-quarter] GDP, which was reported at 7.2% initially."

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