WASHINGTON—A gauge of U.S. factory activity rose in October, a sign the manufacturing sector could be stabilizing after two years of challenging conditions.
The Institute for Supply Management on Tuesday said its purchasing manufacturers’ index rose to 51.9 in October from 51.5 in September. A reading above 50 indicates that factory activity is growing, while a reading under 50 signals contraction.
Details of the report were mixed. The index for new orders dropped, but those for production and employment both rose. Bradley Holcomb, who oversees the ISM survey, said the employment index was due for a correction after several months of contraction, and the rise signaled manufacturers were confident new orders would increase over the next few months. He noted comments from survey participants about future business conditions were generally positive, which he chalked up to improving conditions in the global economy and the imminent conclusion of the U.S. presidential election.
Stephen Stanley, chief economist at Amherst Pierpont Securities, said the index was at a level “consistent with modest growth, which is probably about the best we can expect from manufacturing.”
He added the jump in the employment index “underscores the sense that a tight labor market trumps…election uncertainty in firms’ calculus on whether to pull the trigger on a new hire when a good candidate arises.” The overall economy has been adding jobs even as businesses have been reluctant to invest in equipment.
A separate measure of manufacturing-sector activity from private data provider Markit showed its manufacturing purchasing managers index rebounded in October to 53.4, its highest level in a year, with strength in new orders and output. That follows a reading of 51.5 in September.
“The latest data were not especially strong, but suggest that the manufacturing sector is starting to pick up some momentum following a weak run through most of the year so far,” said Daniel Silver, an economist with J.P. Morgan Chase & Co.
“We think that the sector is due for some improvement as some of the earlier drags that impacted the sector fade.”
The manufacturing sector has been hit by several factors, including low commodity prices, a strong U.S. dollar and weak growth in overseas markets. U.S. companies have also been slow to invest in new equipment and structures, especially in the energy industry, although oil prices have stabilized in recent months. The petroleum and coal products industry was one of the 10 manufacturing industries reporting growth in the October ISM report, out of a total of 18.