The U.S. manufacturing sector expanded in October but at a slower pace than the prior month, according to a closely watched index released Tuesday, in the newest sign of a stalled economy.
The Institute of Supply Management said its purchasing managers index (PMI) registered 50.8%, down from September's reading of 51.6%.
The slowdown in activity surprised most analysts, whose average forecast was for a rise to 52.1%.
October marked the 27th consecutive month of growth in the sector, a key driver in the economic recovery, with new orders rebounding after three months of contraction.
"The ISM report suggests that manufacturing activity is decelerating from the moderate pace achieved in the third quarter," Daniel Meckstroth, chief economist for the Manufacturers Alliance/MAPI. " Manufacturing production increased at a 4% annual rate in the third quarter as measured by the Federal Reserve's industrial production index.
"MAPI expects a deceleration to a 2% annual rate of growth in the final three months of this year, largely due to inventory rebalancing in the electronics and motor vehicle industries that faced supply disruptions earlier in the year," he added. "Pent up demand for some consumer durables, rapid growth in business equipment purchases, and the turning of the private construction cycle should offset the weakening impact of the European debt crisis on U.S. trade."
The prices sub-index dropped 15 percentage points to 41%, falling below the 50% mark that indicates contraction for the first time since May 2009, the month before the severe recession officially ended.
The inventories reading fell to 46.7%, from 52% in September.
"Comments from respondents are mixed, indicating positive relief from raw materials pricing and continuing strength in a few industries, but there is also more concern and caution about growth in this uncertain economy," said Bradley Holcomb, chair of ISM's manufacturing business survey committee.
Copyright Agence France-Presse, 2011
