Indicating an unexpected acceleration in the pace of growth in U.S. manufacturing activity, the Institute for Supply Management released a report on Monday showing that its manufacturing index rebounded in October following the pullback seen in the previous month.
The ISM said its index of manufacturing activity climbed to 59.0 in October from 56.6 in September, with a reading above 50 indicating growth in the sector. The increase came as a surprise to economists, who had expected the index to dip to 56.0.
With the unexpected increase, the manufacturing index matched the reading reported for August, which is the highest reading for the index since March of 2011.
Bradley J. Holcomb, chair of the ISM Manufacturing Business Survey Committee, said, "Comments from the panel generally cite positive business conditions, with growth in demand and production volumes."
The unexpected rebound by the headline index was partly due notably faster growth in new orders, as the new orders index jumped to 65.8 in October from 60.0 in September.
The production index also ticked up to 64.8 in October from 64.6 in September, while the employment index climbed to 55.5 from 54.6.
On the other hand, the report said the prices index tumbled to 53.5 in October from 59.5 in September, indicating a notable slowdown in the pace of price growth.
Rob Carnell, chief international economist at ING, said the strong reading for the headline manufacturing index is historically consistent with GDP growth of about 5 percent.
"We don't think the underlying rate of GDP growth is anything like that strong, though manufacturing is clearly doing better than the larger, service sector of the economy," Carnell said. "Cheap energy is doubtless to thank for part of this outperformance."
Wednesday morning, the ISM is scheduled to release a separate report on activity in the U.S. service sector in the month of October.
Economists expect the index of activity in the service sector to edge down to 58.0 in October after dipping to 58.6 in September.
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