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The Institute for Supply Management (ISM) said on Monday its
index of national factory activity rose to 51.5 from 49.4 the
prior month, beating analyst expectations in a Reuters poll.
Levels above 50 indicate the sector is expanding.
"This is a relief," said Ian Shepherdson, an economist at
Pantheon Macroeconomics.
Factory output was a weak spot for the U.S. economy early in the
year as a global slump weighed on American factories.
More recently, net exports added to economic growth in the
second quarter and Monday's report showed signs factories'
future sales could increase, with the ISM index for new orders
rising to 55.1 from 49.1 in August.
The dollar rose against a basket of currencies while Treasury
yields also moved higher and U.S. stocks fell.
Manufacturing is grappling with the lingering effects of a
strong dollar and lower oil prices. Economic growth is also
listless in major U.S. trading partners in the European Union
and Asia.
Activity in manufacturing, which accounts for 12 percent of the
U.S. economy, has also been undercut by an inventory correction.
Another report on Monday showed U.S. construction spending fell
for the second straight month in August to its lowest level in
eight months, an unexpected drop driven by weakness across
public and private sectors, including in home building.
The Commerce Department said construction spending dropped 0.7
percent to a seasonally adjusted annual rate of $1.142 trillion
in August. Economists had expected outlays to rise 0.2 percent.
The successive monthly declines in outlays suggest home building
might not help economic growth in the third quarter and
forecasting firm Macroeconomic Advisers cuts its expectation for
GDP growth in the July-September quarter to a 2.6 percent annual
rate from a 2.9 percent rate.
Consumer spending has been a major prop for economic growth this
year and automakers on Monday reported total vehicle sales rose
in September to a 17.76 million annualized rate. Compared to the
same month a year earlier, however, sales were down slightly.
(Reporting by Jason Lange; Editing by Andrea Ricci)
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