US manufacturing is approaching a two-year excessive in October
A Dana assembly technician wears a face mask while assembling axles for automakers as the auto industry re-opens following the coronavirus disease (COVID-19) outbreak at the Dana facility in Toledo, Ohio on May 18, 2020.
Rebecca Cook | Reuters
Manufacturing activity in the US accelerated in October and orders reached their highest level in nearly 17 years as spending shifted to goods such as automobiles in the wake of the COVID-19 pandemic.
The Institute of Supply Management (ISM) announced Monday that its index of national factory activities rose to 59.3 last month. This was the highest value since November 2018 and followed a value of 55.4 in September.
The ISM poll is the last major economic data ahead of Tuesday's presidential election. A value above 50 indicates an expansion in manufacturing, which accounts for 11.3% of the US economy. Economists polled by Reuters had forecast the index would rise to 55.8 in October.
The strength of the manufacturing sector should keep the economy going. Growth is likely to slow sharply in the fourth quarter after a historic annual expansion rate of 33.1% in the period from July to September.
Last quarter growth, which followed a record 31.4% in the April-June quarter, was relieved by more than $ 3 trillion in government pandemic aid. Government money has practically dried up and no deal is in sight for another bailout.
The coronavirus crisis has pulled away spending on services for goods that complement lifestyle changes. Spending on goods has exceeded pre-pandemic levels.
The ISM's forward-looking sub-index for new orders rose last month to 67.9, its highest level since January 2004, from 60.2 in September.
With orders booming, employment in manufacturing rose for the first time since July 2019. The ISM's manufacturing employment rate rose from 49.6 in September to 53.2.
This should have supported general employment growth in October. According to a Reuters poll of economists, the number of non-farm workers likely rose 700,000 last month, after rising 661,000 in September. Employment growth has cooled from a record 4.781 million in June.
Around 11.5 million of the 22.2 million jobs lost during the pandemic were restored. The government is expected to release October's employment report on Friday.