Activity in the U.S. manufacturing sector unexpectedly expanded at a slightly faster rate in the month of October, according to a report released by the Institute for Supply Management on Friday.
The ISM said its purchasing managers index inched up to 56.4 in October from 56.2 in September, with a reading above 50 indicating an increase in manufacturing activity.
The modest increase came as a surprise to economists, who had expected the index of manufacturing activity to dip to 55.0.
Brad Holcomb, chair of the ISM Manufacturing Business Survey Committee, said, "The panel's comments are generally positive about the current business climate; however, there are mixed responses on whether the government shutdown and potential default have had any effect on October's results."
The report showed a slight acceleration in the pace of new orders growth, as the new orders index crept up to 60.6 in October from 60.5 in September.
The backlog of orders index also rose to 51.5 in October from 49.5 in September, indicating an expansion compared to the contraction seen in the previous month.
On the other hand, the production index dipped to 60.8 in October from 62.6 in September, suggesting a slower pace of growth.
The report also showed a slowdown in the pace of job growth in the manufacturing sector, as the employment index fell to 53.2 in October from 55.4 in September.
With regard to inflation, the ISM said the prices index edged down to 55.5 in October from 56.5 in the previous month.
James Knightley, an economist at ING Bank, said, "In general it is a very firm report and will help keep faint thoughts of a December Fed taper alive."
"However, the apparent loss of momentum in the labor market coupled likely soft 3Q GDP number next week could quickly see them fade again," he added.
Next Tuesday, the ISM is scheduled to release a separate report on activity in the U.S. service sector in the month of October.
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