updated 12/1/2004 11:19:59 AM ET 2004-12-01T16:19:59

Manufacturing activity expanded in November for the 18th straight month, a research group reported Wednesday, and the rate of growth was faster than economists had been expecting, suggesting that the industrial sector would end the year on a high note.

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The Institute for Supply Management said its main index for measuring industrial activity rose to 57.8 in November, a full point above October’s level. Analysts had been expecting a reading of 57.

A reading of 50 or above in the index means the manufacturing sector is expanding, while a figure below 50 represents a contraction. The index has been above 50 since June of last year.

The report from the Tempe, Ariz.-based research group said new orders for manufactured goods and indicators of employment improved, but it also noted “significant upward pressure” on prices to manufacturers.

The strong reading for the manufacturing index in November followed three months of slowing in the rate of manufacturing growth.

The group reported that while manufacturers were seeing stronger sales, there were concerns that higher prices were eating into profits, particularly costs for energy and commodities used in manufacturing.

“It appears the manufacturing sector is definitely sustaining its momentum,” Norbert Ore, who compiles the monthly report for the ISM, said. “Prices are a big issue, but the strength in new orders offsets some of those concerns as companies work to benefit from the volume.”

Indicators for new orders and employment improved compared with October, the ISM reported, while the backlog of orders decreased and inventories of manufactured goods remained low.

The monthly report is compiled from surveys of purchasing and supply executives at more than 400 industrial companies. The survey includes data on supply shortages and price changes in a number of basic materials used in manufacturing, such as aluminum, latex, oil, steel and rubber.

The report indicated growth in 15 of the 20 manufacturing categories tracked by the ISM, including tobacco, apparel, wood products, electronic components and rubber and plastics.

Separately, the Commerce Department also reported Wednesday that consumer spending rose 0.7 percent in October, up from 0.6 percent rise in September, while personal income grew 0.6 percent as employers hired more people. That compared with a 0.2 percent advance in September and marked the biggest increase since May.

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