Manufacturing expanded in October at a faster pace than forecast, showing American factories were a source of strength for the economy at the start of the fourth quarter.
The Institute for Supply Management’s index climbed to 56.4, the highest since April 2011, from 56.2 a month earlier, the Tempe, Arizona-based group’s report showed today. Readings above 50 indicate growth. The median forecast in a Bloomberg survey of economists was 55.
Resilient motor vehicle sales and the recovery in housing are helping sustain production at the same time global markets begin to pick up. Today’s figures show the brinksmanship over the budget that closed the federal government for 16 days last month did little to spoil the rebound in manufacturing since the middle of the year.
“Manufacturing activity picked up some steam in October,” Brian Jones, senior U.S. economist at Societe Generale in New York, said before the report. The budget impasse “in Washington was just a distraction, and obviously it looks like it wasn’t all that big a distraction to the manufacturing sector at all.”
Estimates for the factory index from 83 economists in the Bloomberg survey ranged from 52.5 to 57.5. Manufacturing accounts for about 12% of the economy.
From China to South Korea, manufacturing strengthened last month in a sign that growth risks are abating in Asia and expansion may pick up this quarter.
China’s official manufacturing index of purchasing managers rose to an 18-month high and a measure from HSBC Holdings Plc and Markit Economics topped projections. HSBC’s reading for South Korea showed growth for the first time since May and Taiwan’s PMI rose to 53 from 52. An Australian index also advanced.
In the U.K., manufacturing eased in October from a month earlier. A measure for Norway showed a pickup in growth, while Switzerland, Sweden and Denmark showed slower expansions.
The ISM’s gauge of U.S. new orders was little changed at 60.6 last month after 60.5 in September. The measure has exceeded 60 for three straight months, the longest since the start of 2011.
An index of production cooled to 60.8 from 62.6. The group’s factory employment measure dropped in October to 53.2 from 55.4, while the index of orders waiting to be filled climbed to 51.5 from 49.5.
The report also showed gauges of factory inventories and customer stockpiles rose in October from the prior month.