By Shobhana Chandra Nov. 2 (Bloomberg) — Manufacturing in the U.S. expanded in October at the fastest pace in more than three years, a sign that factories will be the main driver of the expansion in coming months. The Institute for Supply Management’s factory index rose to 55.7, the highest level since April 2006, from 52.6 in September, according to the Tempe, Arizona-based group. Readings above 50 signal expansion. The ISM’s employment measure showed the first sign of growth since July 2008, reaching the highest level since 2006. Rising sales, boosted in part by the administration’s “cash-for-clunkers” plan, have led to a record plunge in stockpiles that will keep assembly lines humming. While more than $2 trillion in global stimulus will also lift overseas demand, mounting joblessness signals consumer spending will be slow to recover, restraining the expansion. “Aggressive inventory liquidation in the first half of the year and stabilizing orders suggests that manufacturing output will continue to be better supported in coming months,” Joshua Shapiro , chief U.S. economist at Maria Fiorini Ramirez Inc., a New York forecasting firm, said before the report. The figure exceeded economists’ median forecast for an increase to 53, according to 70 projections in a Bloomberg News survey. Estimates ranged from 52 to 55. Stocks Rise U.S. stocks extended gains after the report. The Standard & Poor’s 500 Index rose 1.3 percent to 1,049.65 at 10:34 a.m. in New York. The yield on 10-year Treasury notes was 3.42 percent, up from 3.39 percent at the end of last week. Separate reports today showed the number of contracts to buy previously owned homes in the U.S. rose in September for an eighth straight month and construction spending unexpectedly increased as the expiration of a first-time home-buyer tax credit approached. The index of signed purchase agreements, or pending home sales, rose 6.1 percent after a 6.4 percent gain in August, the National Association of Realtors announced in Washington. Compared with a year earlier, pending sales rose 19.8 percent, without adjusting for seasonal variations. Construction spending rose 0.8 percent, the most in a year, the Commerce Department said. The ISM’s production index rose to 63.3, the highest level since July 2004, from 55.7 the prior month, and the new orders index declined to 58.5 from 60.8. A gauge of export orders increased to 55.5 from 55. The employment index climbed to 53.1, the first expansion in the gauge in more than a year, from 46.2. Prices Advance The index of prices paid rose to 65 from 63.5. The supplier delivery gauge, a measure of the time it takes to receive goods, fell to 56.9 from 58 the prior month. The measure of orders waiting to be filled held at 53.5 for a second month. The inventory index rose to 46.9 from 42.5. A figure below 50 means manufacturers are reducing stockpiles. The world’s largest economy expanded at a 3.5 percent pace from July through September after a yearlong contraction as government incentives spurred consumers to spend more on cars and homes, according to Commerce Department data released last week. Recent reports on manufacturing have shown improvement. The ISM-Chicago Inc.’s business barometer rose in October to the highest level in 13 months, the group reported last week. Gains in the gauges for new orders, production and backlogs signaled the recovery will persist. Regional Federal Reserve Bank reports showed manufacturing in the New York district expanded in October for a third straight month and grew in the Philadelphia region at a slower pace. Texas Instruments Texas Instruments Inc., the second-largest U.S. chipmaker, is among companies saying the future looks brighter. The Dallas- based company forecast fourth-quarter profit and sales that beat the average estimate of analysts surveyed by Bloomberg, indicating demand for electronic components is recovering further. “Our customers are winding down their inventory corrections and have begun to increase production levels in their factories,” Chief Executive Officer Rich Templeton said in a statement on Oct. 19. To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
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Manufacturing in U.S. Expands at a Faster Pace as Factories Propel Growth
