Weather Forecast


Factory activity gauge at 2-1/2-year high

WASHINGTON (Reuters) - A gauge of U.S. factory activity hit a 2-1/2-year high in November and construction spending increased solidly in October, brightening the economic outlook as the year winds down.

The Institute for Supply Management (ISM) said on Monday its index of national factory activity rose to 57.3 last month - outstripping forecasts for 55.0 and the highest reading since April 2011. The index, which indicates expansion in the factory sector when it is above 50, was at 56.4 in October.

November was the sixth consecutive month of faster growth in the goods-producing sector since a contraction in May.

The forward-looking new orders index jumped to its highest level since April 2011, rising to 63.6 from 60.6. The employment index rose to 56.5 from 53.2 to reach the highest level for the subindex since April 2012. Production rose to 62.8 from 60.8.

The latest ISM report mirrored a separate index released on Monday by financial data firm Markit, which showed manufacturing rebounding to a 10-month high in November.

The signs of strength in the two surveys are at odds with so-called hard data such as durable goods orders which have shown factory activity slowing.

A separate report from the Commerce Department showed construction spending increased 0.8 percent to an annual rate of $908.4 billion, the highest level since May 2009. Economists polled by Reuters had expected an increase of 0.4 percent.

Construction spending fell 0.3 percent in September. The release of the September report was delayed by a 16-day partial shutdown of the government in October.

Construction spending in August was revised to show a 0.1 percent rise instead of the previously reported 0.6 percent increase.

Construction spending in October was buoyed by a 3.9 percent jump in public construction projects, the largest increase since March 2004, after a 1.9 percent fall in September.

Public construction spending was boosted by a 3.2 percent increase in state and local government outlays, the biggest advance since February 2009, suggesting a major improvement in finances after years of belt-tightening.

A 10.9 percent surge in spending on federal government projects also supported public construction spending in October.

The increase in spending on federal construction projects was the largest since January 2011.

Spending on private construction projects fell 0.5 percent, pulled down by declines in both residential and nonresidential outlays.

That could be a sign that high interest rates were starting to have an impact on the economy, which bodes ill for investment in both residential and nonresidential structures in the fourth quarter.

(Reporting by Lucia Mutikani and Ryan Vlastelica; Editing by Chizu Nomiyama)