U.S. Manufacturing Expands at Modest Pace as Orders Moderate

(Bloomberg) -- America's factories barely expanded last month as faster production cushioned a slowdown in orders that signals the manufacturing sector is plodding along.

The Institute for Supply Management's index rose to 51.9 in October from 51.5 the previous month, figures from the Tempe, Arizona-based group showed Tuesday. The median forecast in a Bloomberg survey called for 51.7. A reading above 50 signals expansion.

The report represents a pattern throughout the year of “rather slow growth, and yet it's starting to feel a little more consistent,” Bradley Holcomb, chairman of the ISM factory survey, said on a conference call with reporters. It is “a good sign for the fourth quarter,” he said, adding orders are still “in good shape” at the current level.

A third-quarter moderation in consumer demand, weak global markets and limited investment by U.S. businesses have kept orders subdued. While companies have made some progress in trimming bloated inventories, manufacturing has gained little traction after shrinking two months earlier.

The ISM index has averaged 51 so far this year, little changed from 51.3 in 2015, when manufacturing was its weakest in the current expansion.

The ISM new orders gauge fell to 52.1 in October from 55.1 the prior month, while a measure of production rose to 54.6 from 52.8. The index of export orders was little changed at 52.5 after 52.

Ten of 18 industries surveyed by the purchasing managers' group posted growth, including computer and electronic products; petroleum and coal products; and furniture. The ones that contracted included machinery; electrical equipment; and transportation equipment.

The measure of orders waiting to be filled declined from 49.5 to 45.5, matching the lowest since January and indicating production may slow in coming months.

A gauge of factory employment rebounded to 52.9, the first expansion in four months and the highest reading since June 2015.

The measure of factory inventories decreased to 47.5, the lowest since May, from 49.5, while the index for customer stockpiles dropped to 49.5 from 53.

The report also showed the index of prices paid rose to a three-month high of 54.5 from 53.

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net. To contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net, Vince Golle