Manufacturing activity at highest levels in two years

By Martin Crutsinger
AP Economics Writer

WASHINGTON (AP) — U.S. manufacturing posted a strong gain in October to the highest level in two years even as coronavirus cases have begun to surge again in many parts of the country.

The Institute for Supply Management, an association of purchasing managers, said Monday that its manufacturing index rose by 3.9 percentage-points to a reading of 59.3% last month, up from 55.4% in September.

It was the highest level for this closely watched barometer of manufacturing health since September 2018. Any reading above 50 signals that manufacturing is expanding.

The gauge had fallen into recession territory from March through May as much of the country shut down in an effort to contain the coronavirus.

Of the 18 industries covered in the report, 15 reported expansion in October with strong growth in fabricated metals, food and beverages, chemicals and computers and electronics.

Timothy Fiore, chair of the ISM manufacturing survey committee, said that manufacturing was being helped by strong demand coming out of the spring lockups in such areas as home construction and auto sales.

But economists are concerned about the country heading in to widespread lockups, as it did in the spring. Many parts of Europe are already doing so because of a surging infections.

“Manufacturing rebounded strongly with fewer restrictions on economic activity and stimulus efforts but the path forward will be more difficult as the economy continues to cope wit the pandemic,” said Gus Faucher, chief economist at PNC Financial. “An inability of Congress to pass further fiscal stimulus is a significant downside risk.”

The strength in October reflected gains in key areas such as employment and inventories, which both moved from contraction to expansion in October. The new orders component of the index was also strong, rising to the highest level since 2004.

Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said while October was a strong month for manufacturing “the outlook is less positive given renewed virus outbreaks that will disrupt activity and weight on demand.”