October PMI Climbs to 59%, ISM Reports

October PMI Climbs to 59%, ISM Reports

Manufacturing continued its streak of expansion as the October PMI registered 59%, an increase of 2.4 percentage points from September’s reading of 56.6%. It was the 17th consecutive month in which U.S. manufacturing showed growth, the Institute for Supply Management reported.

The October results, said NAM Chief Economist Chad Moutray, suggest "healthy gains in the sector as we move into the fourth quarter."

The October PMI handily beat analysts' consensus of 56.4%, just below the September results. Any reading of 50 or more indicates growth.

"Business conditions are good; sales and production volumes are generally increasing," one manufacturer told ISM. Another, a food manufacturer, said holiday orders are "exceeding seasonal forecasts. Customers are demanding additional quantities above prior orders. Fuel costs and other positive signals appear to be creating demand above normal."

The new orders index registered 65.8%, an increase of 5.8 percentage points from the 60% reading in September, Supply chain managers have now indicated growth in new orders for17 consecutive months. The strong results should continue, according to Michael Dolega, a senior economist with TD Economics.

"The spread between new orders and inventories - which leads the headline index by about three months - rose sharply to 13.3, indicating that further strengthening in the ISM is likely," he commented.

The production index edged up to 64.8%, 0.2 percentage point above the September reading of 64.6%.

Employment showed gains in October as that index frew to 55.5%, an increase of 0.9 percentage point above the September reading of 54.6%.

"A rising level of manufacturing employment shows that production growth is outstripping production gains and is so strong that manufacturers need additional workers," said Daniel J. Meckstroth, chief economist for the MAPI Foundation.

Inventories of raw materials registered 52.5%, an increase of 1 percentage point from the September reading of 51.5%. That was the third month of  growth in inventories in a row.

Of the 18 manufacturing industries, 16 are reporting growth in October.

One area showing softening was exports, which fell 2 percentage points to 51.5. MAPI's Meckstroth noted that the "manufacturing trade deficit continues to worsen."

"With Europe and Brazil exhibiting malaise, China facing decelerating growth and falling commodity prices taking the steam out of much of Latin America and Russia, the United States seems to be an island of prosperity," he observed.

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