U.S. Manufacturing Powers Up in October

Manufacturing activity has expanded for 15 consecutive months.

Unexpectedly, manufacturing unexpectedly picked up steam in October, raising hopes for a strong final quarter that could underpin a flagging economic recovery, a key industry survey showed on Nov. 1.

The Institute of Supply Management (ISM) said its survey of purchasing managers nationwide revealed strong gains in new orders and production, pushing up its index to 56.9%, from 54.5% in September.

The surge was much stronger than a dip to 54% expected by most analysts.

"The ISM index posted a surprisingly strong rebound in light of the report last week that the general economy remains in a growth slump," said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI. "The important reason for the October rebound is the reversal of the trade situation. Export growth reportedly surged while import growth backed off. In other words, less domestic spending was drained away to support foreign manufacturing and more production was directed to domestic producers.

"Manufacturers have experienced parts availability problems for the last six months and have been slow to ramp up production allowing imports to fill the void," he added. "The ISM report suggests that, at last, the import surge in manufactured goods may be subsiding with all the beneficial side effects (rising orders, production, and employment). Today's ISM report is good news for U.S. manufacturing."

Manufacturing activity has expanded for 15 consecutive months but momentum had been slowing since April. The October jump suggested new life in the sector that has been a key driver of the recovery after recession officially ended in June 2009.

"This month's report signals a continuation of the recovery that began 15 months ago, and its strength raises expectations for growth in the balance of the quarter," said Norbert Ore, head of the ISM's manufacturing business survey committee.

Copyright Agence France-Presse, 2010

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