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Upbeat US manufacturing data bolsters recovery hopes

STRONG growth in the US manufacturing sector will add to the upbeat mood prevailing in the US following positive third quarter GDP data. <br /><br />The ISM manufacturing survey hit its highest level in three-and-a-half years in October, rising to 55.7 &ndash; the highest level since April 2006 &ndash; from 52.6 in September. This marked the third consecutive month that the survey has been above the 50&nbsp; mark that indicates growth. <br /><br />However, economists noted that the ISM figure, which surveys manufacturers across the US, was at odds with many of the regional surveys released in the weeks ahead of the national figure.<br /><br />The strong ISM figure also masked some disappointing elements such as the second consecutive fall in the new orders index to 58.5 from 60.8 &ndash; indicating future potential weakness in factory activity. <br /><br />However, the production index jumped to 63.3, from 55.7, while the inventories index improved to 46.9, from 42.5. Capital Economics&rsquo; Paul Ashworth said: &ldquo;Together, that supports our view that an increase in production and a much slower rate of inventory rundown, particularly in the car sector, will make big contributions to fourth-quarter GDP, offsetting some of the slowdown in consumption growth.&rdquo; He added that the strong October ISM data supports his view that the pace of fourth-quarter GDP growth will be similar to the 3.5 per cent seen in the third. <br /><br />Further evidence of a sustainable economic recovery in the world&rsquo;s largest economy came yesterday in the form of pending home sales contracts, which unexpectedly rose in September, marking the eighth consecutive rise in the index. <br /><br />US stock markets rallied strongly on the better than expected data, which offset investors&rsquo; fears of rising unemployment ahead of the US jobless figures out on Friday.