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US manufacturing index hits 13-year high, construction spending rebounds

The dollar rose against the euro after the data

Reuters  |  Washington 

US economy
Construction towers above the skyline in Miami, Florida, US | Photo: Reuters

US factory activity surged to a more than 13-year high in September amid strong gains in new orders and raw material prices, pointing to underlying strength in the even as Hurricanes and are expected to dent growth in the third quarter.

The economic outlook was also bolstered by other data on Monday showing a rebound in spending in August. The acceleration in activity and the accompanying increase in prices could harden expectations that the Federal Reserve will raise interest rates in December.

The Institute for Supply Management (ISM) said its index of national factory activity surged to a reading of 60.8 last month, the highest reading since May 2004, from 58.8 in August.

A reading above 50 in the ISM index indicates an expansion in manufacturing, which accounts for about 12 percent of the U.S. The ISM said and had caused supply chain and pricing issues in the chemical products sector. There were also concerns about the disruptive impact of the storms in the food, beverage and tobacco products industries.

The Hurricanes are expected to chop off as much as six-tenths of a percentage point from gross domestic product growth in the third quarter. Harvey, which pummeled at the end of August, has undercut consumer spending and weighed on industrial production, homebuilding and home sales.

Further weakness in likely after struck in early September, causing widespread power cuts. outside the areas affected by the hurricanes remained strong in September. The ISM survey's production sub-index rose 1.2 points to a reading of 62.2 in September.

A gauge of new orders jumped to 64.6 in September from 60.3 in August. Factories reported paying more for raw materials, with the survey's prices paid index surging 9.5 point to 71.5, the highest reading since May 2011.

The rose against the euro after the data. Prices for U.S. Treasuries were trading higher as stocked on

Spending Rises

In a separate report on Monday, the Commerce Department said spending rose 0.5 percent to $1.21 trillion. July's outlays were revised sharply down to show a 1.2 percent plunge instead of the previously reported 0.6 percent drop. spending increased 2.5 percent on a year-on-year basis.

The government said and did not appear to have impacted the spending data as the responses from the and areas affected by the storms were "not significantly lower than normal."

In August, spending on private residential projects increased 0.4 percent, rising for a fourth straight month. Spending on nonresidential structures increased 0.5 percent, snapping two straight monthly declines.

In the wake of and Irma, nonresidential spending could fall in September. According to the Commerce Department, and accounted for 22 percent of U.S. private nonresidential spending in 2016.

Investment in nonresidential structures such as oil and gas wells has been slowing as the boost from recovering fizzles. Private projects spending increased 0.4 percent in August.

Outlays on public projects rebounded 0.7 percent in August after slumping 3.3 percent in July. Spending on state and local government projects increased 1.1 percent in August. Gains in September are likely to be curbed by the hurricanes.

and accounted for 15 percent of U.S. state-and -locally owned spending in 2016, according to the Commerce Department.

Federal government spending tumbled 4.7 percent to its lowest level since April 2007.

First Published: Mon, October 02 2017. 20:56 IST