American manufacturing activity continued its six-month expansion in October, according to Institute for Supply Management data released on Monday, with 15 of the 18 manufacturing industries included in the data reporting growth.
New orders led the way, growing at the fastest pace since 2004.
October marked the fastest pace of manufacturing expansion in the United States since the fourth quarter of 2018, led by the strongest growth in new orders since 2004. The ISM’s manufacturing index rose to a 59.3 reading in October from 55.4 in September.
Readings above 50 indicate expansion, and October’s reading blew past forecasts, which had called for a median projection of 56.
The pandemic caused manufacturing activity to reach an 11-year low of 41.5 in April, but has steadily increased since then, driven by both the recovery in China, the central economy in global manufacturing and strength in domestic demand for goods, including cars and trucks.
The headline index was lifted by sharp increases in orders, which rose to 67.9 from 60.2 in September, and production, which increased 2 points. Both grew for the fifth consecutive month.
Factory inventories rose to 51.9 in October and customer inventories contracted at a faster pace, to 36.7, denoting that levels are too low by historic measures, the report showed.
“The manufacturing economy continued its recovery in October. Survey Committee members reported that their companies and suppliers continue to operate in reconfigured factories; with every month, they are becoming more proficient at expanding output,” says Timothy R. Fiore, chairman of the Institute for Supply Management Manufacturing Business Survey Committee.
The outlook for employment in the sector improved for the sixth consecutive month, registering 53.2 in October and reversing 14 consecutive months of contraction. Survey panelists’ comments indicate that significantly more companies are hiring or attempting to hire than those reducing labor forces. An employment index above 50.8%, over time, is generally consistent with an increase in the Bureau of Labor Statistics’ data on manufacturing employment.
This month’s report underscores a steady recovery for U.S. manufacturers, and as we look forward, the ISM and other surveys, including the RSM US Manufacturing Outlook Index, are consistent with further increases in orders and output over the next few months.
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