U.S. manufacturing expanded far more briskly than estimated in October, fully recovering from the previous month’s deceleration to return to its fastest growth rate in three-and-a-half years as new orders rebounded sharply, according to an industry report released on Monday.
The Institute for Supply Management (ISM) said its index of national factory activity rose to 59 in October from 56.6 in September. That brought the index back to the same level it recorded in August, which had been the highest since March 2011.
The reading exceeded expectations of 56.2, according to a Reuters poll of economists, topping even the most optimistic estimate of 57.3. A reading above 50 indicates expansion in the manufacturing sector.
The employment gauge recovered in October to 55.5 from 54.6 in September, also exceeding expectations, which had called for a reading of 54.8. The new orders index rose to 65.8 from 60.0.
The gauge of prices paid plunged by 6 points to 53.5 from 59.5, compared with forecasts for a reading of 56.3 in the Reuters poll. It was the largest drop in the index since a 7-point drop in March 2013 and coincided with a huge drop in oil prices.
U.S. crude oil futures fell more than 11 percent in October, the largest monthly decline in two-and-a-half years.
Construction spending drops
U.S. construction spending fell for a second straight month in September as investment in both private and public projects declined, suggesting the third-quarter growth estimate could be revised lower.
Construction spending dropped 0.4 percent to an annual rate of $950.9 billion, the Commerce Department said in a separate report. August’s construction outlays were revised to show a 0.5 percent fall instead of the previously reported 0.8 percent decline.
Economists polled by Reuters had forecast construction spending rising 0.7 percent.
The government last week reported that the economy grew at a 3.5 percent annual pace. Growth in spending on both residential and nonresidential construction were reported to have slowed from April-June’s brisk rates.
In September, private construction spending dipped 0.1 percent to its lowest level since October last year as an increase in residential outlays was offset by a decline in spending on nonresidential projects. It was the fourth straight month of declines in private constructions spending.
Spending on public construction projects fell 1.3 percent in September, with state and local government investment declining 1.4 percent. Spending on construction projects by the federal government slipped 0.3 percent, falling for a third consecutive month.