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U.S. manufacturing index surges

/ Source: The Associated Press

The nation’s manufacturing sector expanded strongly in October, with the fourth consecutive month of growth boding well for the overall economy in the final quarter of the year.

The Institute for Supply Management reported Monday that its manufacturing index rose to 57 last month from 53.7 in September.

An index reading above 50 indicates expansion; one below 50 indicates that manufacturing activity is contracting. From March through June, the manufacturing index was below 50.

The October reading was well above the 55.5 that analysts had expected.

In Washington, meanwhile, the government said construction spending in September posted its best month on record, underscoring the role the red-hot housing market played in the economy’s strong performance last quarter.

The Commerce Department said that the total value of building projects under way came in at a seasonally adjusted annual rate of $910.6 billion in September, a 1.3 percent rise from the previous month. The latest reading was an all-time monthly high, and the 1.3 percent increase exceeded analysts’ expectations for a more modest advance of around 0.4 percent.

Spending by private builders on housing projects rose 1.4 percent in September to a rate of $471.4 billion, the highest monthly level on record, the department said.

The Institute for Supply Management’s index is watched closely each month because it is the first major measure of the previous month’s economic activity to be released.

Norbert J. Ore, chairman of the institute’s manufacturing business survey committee, said in a statement accompanying the report that new orders continued to lead the manufacturing recovery.

He added: “Production made a sharp swing upward during October, signifying growth for the sixth consecutive month.”

Still, manufacturing employment continued to be weak, suggesting that factories still haven’t absorbed excess capacity to the point where they are comfortable hiring.

The employment index registered 47.7 in October, up from 45.7 in September but still well below the 50 that would signify growth.

The report said it was the 37th consecutive month that the index reading was below 50.

The new orders index rose to 64.3 in October from 60.4 the previous month, while the production index advanced to 62.6 in October from 57.3 in September.

The report said that 14 of 20 industries reported increased production in October, including tobacco, paper, food, furniture, primary metals, chemicals, electronic components and equipment, industrial and commercial equipment, and rubber and plastic products.

Inventories remained lean, while the backlog of orders grew and the prices manufacturers paid for raw materials continued to rise.