U.S. Manufacturing Grows for Third Consecutive Month

ISM says manufacturing is in sustainable recovery mode

The U.S. manufacturing sector expanded for a third consecutive month in October, with the index of activity at a stronger-than-expected 55.7%, the Institute of Supply Management survey showed on Nov. 2.

Its factory index, also known as the purchasing managers index, showed the highest rate of growth since April 2006. The closely watched index based on a survey of supply executives rose from 52.6% last month and was stronger than market expectations of a figure of 53%. Any number above 50 indicates growth.

"The jump in the index was driven by production and employment, with both registering significant gains," said ISM survey chief Norbert Ore. "Production appears to be benefiting from the continuing strength in new orders, while the improvement in employment is due to some callbacks and opportunities for temporary workers. Overall, it appears that inventories are balanced and that manufacturing is in a sustainable recovery mode."

Among the sub-indexes in the survey, the employment index was 53.1%, marking a sharp turnaround from last month's level of 46.2% and suggesting that factories are starting to add jobs.

The sub-index of new orders was 58.5%, a slower pace of growth than the prior month. But the production index surged by 7.6 points to 63.3%, indicating factories are ramping up operations following the long recession.

"A larger positive spread between the current index and 50% indicates accelerating growth. Clearly, the October report is very good news in many respects. An increase in manufacturing production in October, as the report signals, adds to the evidence that the worst post-World War II recession has ended and a lasting recovery is underway. Inventory stabilization and federal stimulus probably provided much of the current momentum," said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI.

"Nevertheless, production creates more demand in the form of positive momentum, the large improvement in production has helped pricing, and the falling dollar has aided exports," he added. "Although we are somewhat skeptical, let's all hope that the report is correct regarding an increase in October manufacturing employment."

Copyright Agence France-Presse, 2009

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