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 The Institute for Supply Management said Monday that its index of
manufacturing activity rose to 57.3. That was up from 56.4 in
October and was the highest since April 2011. A reading above 50
signals growth.
One component of the index, a measure of hiring, rose to its highest
level in nearly 18 months. And a gauge of export orders reached its
highest level in nearly two years. Overseas demand is benefiting
from modest recoveries in Europe, Japan and China.
The ISM is a trade group of purchasing managers.
Manufacturing activity has now expanded for six straight months
after hitting a rough patch in the spring. The steady gains suggest
that growth is remaining solid in the current October-December
quarter.
And U.S. builders increased construction spending in October at the
fastest pace in more than four years, a separate report on Monday
showed. Government spending on public projects drove the increase.
By contrast, spending on home construction fell.
Still, the encouraging figures in the ISM's report conflict with
weaker recent data on factory activity, making it difficult to
discern a clear trend.
"We continue to believe that this indicator is overstating the
health of the broader economy," said Joshua Shapiro, chief U.S.
economist at MFR Inc.
For example, businesses cut back on orders for long-lasting factory
goods in October, according to a government report Wednesday. Orders
for durable goods, which are meant to last three years, fell 2
percent.
A fall in aircraft demand drove the decline. But companies also
spent less on machinery, computers and metal parts. The weak showing
suggests that businesses might have been reluctant to order more
goods during the 16-day partial government shutdown in October.
One reason for the divergence could be that the ISM's index doesn't
adequately measure smaller manufacturers, according to Ian
Shepherdson, an economist at Pantheon Macroeconomics. Larger
companies are likely benefiting more from recoveries overseas.
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Separate reports Monday showed that manufacturers in China and
Europe expanded in November, though more slowly than in the United
States. Still, factories in Europe grew at the fastest pace in
nearly two years, according to a survey by Markit.
Another reason for the conflicting reports may be that production
of non-durable goods appears to be stronger than production of
durable goods. For example, the ISM report showed that manufacturing
in non-durable areas like the food, textiles, petroleum, chemical
and paper products industries grew. At the same time, some durable
goods industries, such as machinery, contracted in November.
Some respondents to the ISM's survey said federal spending cuts and
budget battles in Washington limited business spending on durable
goods last month.
Separately, factory output rose for a third straight month in
October, according to the Federal Reserve, driven higher by greater
production of primary metals and furniture.
The mixed picture comes as the economy is thought to be slowing in
the October-December quarter to an annual rate of 2 percent or less.
That would be down from a 2.8 percent annual pace in the
July-September quarter.
Much of the third-quarter's growth was due to companies rebuilding
their stockpiles. The economy is unlikely to benefit from a similar
trend in the current quarter.
[Associated
Press; CHRISTOPHER S. RUGABER, AP Economics Writer]
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