Data Show Burst of Growth in Manufacturing
U.S. manufacturers cranked up output in October to the fastest level in nearly four years, according to a report Monday that showed hard-hit factories enjoyed their best rebound since the 2001 recession.
Separate government data showed that construction spending hit record highs in September, suggesting that overall third-quarter growth, which came in at the strongest pace in two decades, could be revised even higher.
Taken together, the data suggested that the recent burst of economic activity would maintain momentum and probably would help spur more job gains -- possibly putting the final pieces in place for a full-fledged expansion.
“Manufacturing has definitely made a turn and is in a recovery phase,” said Paul Kasriel, head of economic research at Northern Trust in Chicago.
The Institute for Supply Management said its October purchasing managers’ index jumped to 57.0 -- the highest since January 2000 -- from 53.7 in September, beating forecasts. Any reading above 50 points to growth in the sector, which makes up less than a fifth of the overall economy.
A breakdown of the ISM survey’s components pointed to strong future growth as well. New orders flooded in at the quickest pace in four years, rising to 64.3 in October from 60.4 in September.
Backlogs of orders also rose, while the dollar’s weakness and better demand from abroad boosted exports. Even as orders for goods kept streaming in, cautious factories cut back on already lean inventories. To meet demand, production will have to head higher.
The burst of growth and production helped push the ISM employment index from 45.7 to 47.7, its highest level in 10 months. Although that level means a slower pace of layoffs, some economists said it also suggested hiring by manufacturers.
Factories have suffered the most in the recession and stumbling recovery, losing more than 2.5 million jobs. Those layoffs have made manufacturers’ complaints about China’s currency policy a hot political issue heading into next year’s U.S. presidential election.
October was the fourth straight month of expansion for manufacturing, and Norbert Ore, head of the ISM manufacturing business survey committee, notes that job gains usually come at this point in an expansion.
“But this is not a typical recovery by any means,” Ore said.
Construction spending hit record highs in September, fueled by the still-booming housing market and a turnaround in long-moribund non-residential building.
Overall construction spending climbed 1.3% to a seasonally adjusted $910.63 billion in September, from $898.83 billion in August, the Commerce Department said. That beat analysts’ forecasts of a 0.3% increase.
The August increase also was revised upward to 0.7% from 0.2%. Economists said that means the stellar 7.2% growth rate clocked in the third quarter -- the highest in two decades -- probably would be revised even higher.
Private residential construction spending rose 1.4% to $471.45 billion from $464.96 billion, the highest level on record. Despite a recent rise, mortgage interest rates near historically low levels keep pulling in buyers.
Private non-residential construction spending rose 2.5%, the biggest jump in nearly a year, to $219.17 billion from $213.91 billion the previous month. Overall public construction and state and local construction spending hit record highs.