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Manufacturing grows, but economy still fragile

Keywords: Tags  Instiute for Supply Management, purchasing managers index, PMI, Bradley J. Holcomb, corinna petry

CHICAGO — Economic activity in the U.S. manufacturing sector expanded in October for the second consecutive month, with the Institute for Supply Management (ISM) purchasing managers’ index inching up one-fifth of a point to 51.7 percent.

The improvement was sparked by growth in new orders and production, which more than offset declining employment, inventories, prices, backlogs and exports.

"Comments from the panel (of survey respondents) reflect continued concern over a fragile global economy and soft orders across several manufacturing sectors," said ISM manufacturing business survey committee chairman Bradley J. Holcomb.

Although the new orders index rose 1.9 percentage points from September to its highest level since May, primary metal producers reported a contraction in new orders. "Sales and order intake have slowed," one metal producer said.

Aluminum and stainless steel prices rose last month, survey respondents said, but scrap and carbon steel prices fell. Metal producers reported paying lower prices in October, while prices for fabricators’ purchases were flat.

Metal producers lowered output from a month earlier, while fabricators’ new orders and output remained steady. However, metal producers increased employment in October, while fabricators saw a decrease. Both sectors reduced inventories, and both said their customers’ inventories were too high.

Both metal manufacturers and fabricators said that their backlogs declined from September. Fabricators reported growth in export orders and imports, while producers said exports and imports both fell.

"Manufacturing continues to hold up better in the United States than in the rest of the world," Nigel Gault, chief U.S. economist for Lexington, Mass.-based IHS Global Insight, said. "The (ISM) report was not wholly positive—order backlogs are still falling very sharply—but the improvement in domestic orders was another step in the right direction. Further improvements in housing and consumer spending are providing support."

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