US factory output and hiring increase

Production at US factories rose at a faster-than-expected pace in September and companies hired more staff, data has shown, adding to hopes the US economy should escape recession.

The Institute for Supply Management has said its index of national factory activity rose to 51.6 last month from 50.6 in August, in the 26th consecutive month of growth. A reading above 50 indicates expansion.

A separate report from the Commerce Department showed an unexpected rebound in construction spending in August as outlays on state and local government building projects rose sharply.

Construction spending rose 1.4 per cent to an annual rate of $799.2bn (£512.8bn), the Commerce Department said. Economists had forecast a 0.3 per cent drop.

US manufacturing activity has supported the economy in its recovery from the financial crisis and the report implied that an outright contraction in output would probably be avoided.

But the index for new orders was unchanged, prompting economists to caution that manufacturing was still struggling in a tough environment. Economists had expected the index to edge down to 50.5.

ING economist Teunis Brosens said the result “provides some relief that the US economy is holding up for now.”

“At least the financial market turmoil and subsequent plunge in sentiment has not yet dragged the manufacturing sector into contraction territory. But with order books becoming less full and ongoing market jitters about the uncertainty in Europe, the situation remains highly uncertain,” he said.