November 1, 2010

Manufacturing Sees Continued Gains but Income, Spending Falter

ISM index rose 2.5% in September; income down 0.1% and spending up 0.2% in September

On the eve of Election Day, Monday’s economic news showed that manufacturing expanded nationwide in October for the 15th consecutive month while Americans spent more and earned less in September.

The purchasing managers index (PMI) released by the Institute for Supply Management (ISM) stood at a level of 56.9 in October versus 54.4, growing at a rate of 2.5%. Supply executives surveyed in the PMI reported that new orders were up 7.8%, and production rose 6.2%. Even manufacturing employment—seen as particularly sluggish this year—grew at a faster rate in October, rising 1.2% to a level of 57.7 versus 56.5 in September.

"The manufacturing sector grew during October, with both new orders and production making significant gains,” said Norbert Ore, chairman of the ISM’s manufacturing business survey committee, in a statement. “Since hitting a peak in April, the trend for manufacturing has been toward slower growth. However, this month's report signals a continuation of the recovery that began 15 months ago, and its strength raises expectations for growth in the balance of the quarter.”

Survey respondents saw recovery in autos, computers and exports as key drivers of this growth, Ore noted, while concerns about inventory growth were lessened by the improvement in new orders during October.

“With 14 of 18 industries reporting growth in October, manufacturing continues to outperform the other sectors of the economy,” he said.

Meanwhile, the Commerce Department’s personal income and outlays report on Monday showed Americans

 

spending more yet earning less in September. Personal income decreased $16.8 billion, or 0.1%, while spending increased $17.3 billion, or 0.2%. That compares to August’s 0.4% rise in income and 0.5% rise in spending.

 “Income growth for September came in a little weaker than expected, decreasing by 0.1% on a nominal basis, consistent with weak labor market data for the month,” wrote the economists at PNC Financial Services, Pittsburgh, in an analyst note. “September payroll employment fell by 95,000 as the last big slug of temporary census workers were let go and local governments also shed employees. Wages and salaries in September were unchanged.”

Read about the ISM manufacturing index in September at AdvisorOne.com.

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