WASHINGTON, Nov 2 (Reuters) - U.S. manufacturing activity accelerated in October, with new orders jumping to their highest level in nearly 17 years amid a shift in spending toward goods like motor vehicles as the COVID-19 pandemic drags on.
The Institute for Supply Management (ISM) said on Monday its index of national factory activity increased to a reading of 59.3 last month. That was the highest since November 2018 and followed a reading of 55.4 in September.
The ISM survey is the last piece of major economic data before Tuesday’s presidential election. A reading above 50 indicates expansion in manufacturing, which accounts for 11.3% of the U.S. economy. Economists polled by Reuters had forecast the index rising to 55.8 in October.
The strength in manufacturing will likely keep the economy floating, with growth expected to slow sharply in the fourth quarter after a historic 33.1% annualized rate of expansion in the July-September period.
Growth last quarter, which followed a record 31.4% pace of contraction the April-June quarter, was juiced up by more than $3 trillion in government pandemic relief. Government money has virtually dried up and there is no deal in sight for another rescue package.
The coronavirus crisis has pulled spending away from services towards goods that complement the changed life-style. Spending on goods has surpassed its pre-pandemic level.
The ISM’s forward-looking new orders sub-index surged to a reading of 67.9 last month, the highest reading since January 2004, from 60.2 in September.
With orders booming, manufacturing employment expanded for the first time since July 2019. The ISM’s manufacturing employment gauge rose to a reading of 53.2 from 49.6 in September.
That likely supported overall job growth in October. According to a Reuters survey of economists, nonfarm payrolls probably increased by 700,000 jobs last month after rising 661,000 in September. Employment growth has cooled from a record 4.781 million in June.
About 11.5 million of the 22.2 million jobs lost during the pandemic have been recovered. The government is scheduled to publish October’s employment report on Friday. (Reporting By Lucia Mutikani Editing by Chizu Nomiyama)
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