Tags: factory | manufacturing | ISM | economy

Manufacturing Expanded More Than Forecast in October, ISM Says

Monday, 03 November 2014 10:24 AM EST

Manufacturing in the U.S. expanded in October at a faster pace than forecast.

The Institute for Supply Management’s factory index increased to 59 in October, matching August as the highest since March 2011, after 56.6 the prior month, the Tempe, Arizona-based group’s report showed. Readings above 50 indicate expansion. A gauge of production was the strongest in a decade.

The pickup signals U.S. factories are withstanding slower global markets as improving balance sheets give households and companies the wherewithal to spend. A stronger job market and the cheapest gasoline prices since 2010 will probably provide an added boost to consumer demand, keeping assembly lines busy.

“The fundamentals of the domestic economy are improving at a faster rate,” Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Alabama, said before the report. “At least for now, they’ve going to override slower global growth.”

The median estimate in a Bloomberg survey of 83 economists called for a decline to 56.1. Estimates ranged from 55 to 58.6. Manufacturing accounts for about 12 percent of the economy.

American factories are expanding faster than their counterparts in the rest of the world. European manufacturing barely grew last month as output in France and Italy shrank, while factories in China showed signs of cooling.

A final reading of a Purchasing Managers’ Index for the industry in the euro area stood at 50.6 in October, London-based Markit Economics said today. While up from a 14-month low of 50.3 in September, it’s below a 50.7 estimate released on Oct. 23 and barely above the mark of 50 signaling expansion.

China Manufacturing

China’s official gauge of manufacturing eased to 50.8 last month from 51.1 in September. A separate purchasing managers’ index from HSBC Holdings Plc and Markit was little changed at 50.4 in October after a final reading of 50.2 in the previous month.

The ISM’s U.S. gauge of production advanced to 64.8, the highest since May 2004, from 64.6. The new orders measure climbed to 65.8 last month from 60 in September, while the index of bookings waiting to be filled rose to 53 in October from 47.

“You have domestic firms engaging in more capital spending, and you have consumer spending, while it’s not growing at a gangbusters rate, it’s been fairly steady,” Moody said.

The measure of factory employment increased to 55.5 from 54.6 in September. The prices paid index dropped to 53.5, the lowest this year and probably reflecting cheaper costs for energy and raw materials, from 59.5.

Business Inventories

The inventory gauge increased to 52.5 in October from 51.5 the month before, while the index of customer stockpiles rose to 48 from 44.5. Figures less than 50 means manufacturers are paring stockpiles.

Demand for cars, a source of strength for U.S. manufacturing this year, showed signs of moderating in September after sales climbed to a 12-year high. Automakers reported September sales of 16.3 million vehicles at an annualized pace after a 17.5 million rate in August that was the highest since January 2006.

Motor vehicle production helped drive the economy in the third quarter. Gross domestic product advanced at a 3.5 percent annual rate from July through September after a 4.6 percent gain in the previous three months, Commerce Department figures showed last week. It marked the strongest back-to-back readings since the second half of 2003.

The report showed companies kept spending after a first- quarter setback as investment in equipment increased at a 7.2 percent annual rate after an 11.2 percent gain in the second quarter.

Heavy Trucks

The pickup in growth is spurring sales at companies such as Paccar Inc., the Bellevue, Washington-based heavy truck manufacturer. Paccar delivered 37,400 trucks during the second quarter, up 6 percent from the year before and an increase of 11 percent from the second quarter, as its U.S. and Canadian customers expand their fleets and replace older vehicles.

“Our customers are benefiting from positive economic trends that are generating record freight tonnage and higher fleet utilization,” such as growth in auto sales, Chief Executive Officer Ronald Armstrong said in an Oct. 28 earnings call. “Other good economic news is that the U.S. unemployment gains this year have averaged 227,000 jobs per month and lower fuel prices are benefiting our customers’ operating costs.”

On a regional level, business activity in the Chicago area expanded in October at the fastest pace in a year. The Institute for Supply Management-Chicago Inc. said its business barometer rose to 66.2 last month from 60.5.

© Copyright 2024 Bloomberg News. All rights reserved.

Manufacturing in the U.S. expanded in October at a faster pace than forecast. The Institute for Supply Management's factory index increased to 59 in October, matching August as the highest since March 2011, after 56.6 the prior month.
factory, manufacturing, ISM, economy
Monday, 03 November 2014 10:24 AM
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