WASHINGTON – Manufacturing grew in October at a faster pace than forecast, showing U.S. factories were a source of strength for the economy at the start of the fourth quarter.
The Institute for Supply Management’s index climbed to 56.4, the highest since April 2011, from 56.2 a month earlier, the Tempe, Ariz.-based group’s report showed Friday. Readings above 50 indicate growth. The median forecast in a Bloomberg survey of economists was 55.
Resilient motor vehicle sales and the recovery in housing are helping sustain production at the same time global markets begin to pick up. Today’s figures show the brinksmanship over the budget that closed the federal government for 16 days last month did little to spoil the rebound in manufacturing since the middle of the year.
“The government closure didn’t have much effect on manufacturing -- this is a modest pace of growth and fairly well-sustained,” said Terry Sheehan, an economic analyst at Stone & McCarthy Research Associates in Princeton, N.J., who projected a reading of 56.4. “We actually see some increase in the export orders, so it’s possible that some of the slowness in the global economy is beginning to ease.”
Stocks maintained gains after the figures. The Standard & Poor’s 500 Index advanced 0.2 percent to 1,760.56 at 10:46 a.m. in New York.
Estimates for the factory index from 83 economists in the Bloomberg survey ranged from 52.5 to 57.5. Manufacturing accounts for about 12 percent of the economy. Of the 18 industries covered, 14 reported expansion in October, led by textile mills, the ISM said.
While the gauge showed little effect on manufacturing from the partial shutdown of federal agencies last month, reduced government spending prompted economists to cut their fourth-quarter growth forecasts, according to a survey Thursday.
The world’s largest economy will expand at a 2 percent annualized rate in the final three months of 2013, less than the 2.4 percent pace projected in an Oct. 4-9 survey of economists.
From China to South Korea, manufacturing strengthened last month in a sign that growth risks are abating in Asia and expansion may pick up this quarter.
China’s official factory index of purchasing managers rose to an 18-month high and a measure from HSBC Holdings Plc and Markit Economics topped projections. HSBC’s reading for South Korea showed growth for the first time since May and Taiwan’s PMI rose to 53 from 52. An Australian index also advanced.
In the U.K., manufacturing eased in October from a month earlier. A measure for Norway showed a pickup in growth, while Switzerland, Sweden and Denmark showed slower expansions.