November 3, 2013

Factory output keeps on growing

Activity rises for the fifth straight month, boosted by overseas demand, and despite the shutdown.

By Christopher S. Rugaber
The Associated Press

WASHINGTON — U.S. factory activity expanded in October at the fastest pace in 21/2 years, suggesting that the 16-day partial shutdown of the government had little effect on manufacturers.

Instead, overseas demand and healthy U.S. auto sales appear to be supporting factory output. The housing recovery is also lifting the furniture and wood products industry despite a recent slowing in home sales.

“We’ve become accustomed to the way Washington operates in the past couple of years and assume that it will get resolved eventually, however painfully,” said Bradley Holcomb, head of the survey committee of the Institute for Supply Management, a trade group of purchasing managers that on Friday reported a solid manufacturing figure for October.

The ISM’s manufacturing index rose to 56.4 from 56.2 in September. A reading above 50 indicates growth.

Factories also expanded in Europe in October, though at a slightly slower pace, according to surveys in that region. Manufacturing indexes have all picked up in China, Japan and South Korea.

The overseas strength is boosting demand for U.S. factories. A measure of export orders jumped to its highest level in nearly a year and a half in October, the ISM report said.

“The outlook for manufacturing looks far more constructive now than it did over the past several months, in light of the improving global backdrop,” said Michael Dolega, an economist at TD Economics.

U.S. factory activity has now risen at an increasingly fast pace for five straight months, according to the ISM’s index. In October, a measure of new orders rose slightly. And a gauge of production fell but remained at a high level. Factories added jobs, though more slowly than in September.

The shutdown did depress activity at some companies that make metal products and electrical equipment. And while the survey’s findings suggest stronger output in coming months, the most recent measures of factory production remain tepid.

“The strength of this hasn’t yet been reflected in actual manufacturing output,” said Amna Asaf, an economist at Capital Economics.

Analysts were also encouraged by a survey of companies in the Chicago region, released Thursday. It found that the companies expanded at their fastest pace in more than two years in October. New orders jumped, and hiring also rose.

Still, economists don’t expect manufacturing to boost economic growth in the coming months.

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