updated 11/1/2010 10:25:17 AM ET 2010-11-01T14:25:17

Manufacturing activity expanded last month at the fastest pace since May due to a surge in new orders and production.

The Institute for Supply Management says its manufacturing index read 56.9 in October, up from 54.4 in September. It was the 15th straight month of growth. A reading above 50 indicates growth.

Manufacturing has helped drive the economy out of recession last year, but growth had slowed in recent months. Manufacturing activity in China rose last month. A survey affiliated with the government said its measure rose to 54.7 in October from 53.8 in September.

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Separately, another reports showed construction spending edged up slightly in September, after having fallen to the lowest level in a decade, as a gain in residential activity and government projects helped offset weakness in commercial projects.

The Commerce Department said Monday that spending on building projects rose 0.5 percent in September after having fallen 0.2 percent in August to the lowest point since July 2000.

Even with the small September gain, construction activity remains 34 percent below the peak hit in 2006 when builders were enjoying a boom in residential housing. That boom turned into a bust that helped drag the country into a severe recession.

In September, total spending edged up to $801.7 billion at a seasonally adjusted annual rate, compared to spending of $1.21 trillion at an annual rate in March 2006 at the peak of the housing boom.

Major Market Indices

Residential activity rose 1.8 percent to an annual rate of $231.7 billion in September, the first gain after four straight declines. That weakness reflected the end of a popular government tax credit for homebuyers which had spurred construction before it ended in April.

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Private non-residential building projects posted a decline of 1.6 percent to an annual rate of $250.3 billion in September after a 0.8 percent rise in August. The August increase had followed four straight monthly declines in this category, reflecting the deep recession and the trouble builders are having in obtaining financing for shopping centers and other commercial projects.

Spending on government projects rose 1.3 percent to an annual rate of $319.7 billion. That reflected a 6.1 percent jump in federal spending and a more modest 0.8 percent rise in spending by state and local governments.

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