ISM: Manufacturing grows most since '06

NEW YORK (AP) - A private measure of U.S. manufacturing activity grew in October at the fastest pace in more than three years, helped by government spending and higher demand from overseas. The better-than-expected reading is a positive signal for the fledgling economic recovery.

The Institute for Supply Management, a trade group of purchasing executives, said Monday that its manufacturing index read 55.7 last month, compared with 52.6 in September. It's the third straight reading above 50, which indicates growth.

Analysts polled by Thomson Reuters had expected the index to come in at 53. In April 2006, the ISM's level registered 56.

Employment grew for the first time in 15 months, rising to 53.1 last month. But the measure tracking new orders, a signal of future production, slipped to 58.5 from 60.8 in September.

But there are worries about the sustainability of the manufacturing sector's recovery as government stimulus programs wind down.

Christina Romer, who heads the president's Council of Economic Advisers, last week said the government's stimulus spending already had its biggest impact and probably wouldn't contribute to significant growth next year.

Still, manufacturers in other countries also are helping propel their respective economies. Manufacturing in China, which posted the strongest growth of the world's major economies in the third quarter, expanded for an eighth straight month in October, according to a survey by a government-sanctioned industry group.

European surveys also showed growth despite the recent climb by the euro and pound against the dollar, which makes Europe's exports more expensive. A purchasing managers' index measuring the 16-nation eurozone expanded last month for the first time in a year-and-a-half, while a British survey spiked to 53.7 in October from 49.9 the previous month, the fastest pace of growth since November 2007.

In October, the ISM said 13 of the 18 manufacturing industries surveyed expanded, led by petroleum and coal production, apparel and furniture. Three industries shrank.

"Overall, it appears that inventories are balanced and that manufacturing is in a sustainable recovery mode," said Norbert Ore, chair of the ISM's manufacturing survey committee.

Construction spending in September also was better than expected, due mainly to the largest jump in housing construction in more than six years.

The Commerce Department said Monday that total construction spending rose 0.8 percent in September, much better than the 0.3 percent drop that analysts expected. The August performance was revised down to a 0.1 percent drop from a 0.8 percent gain.