Manufacturing Rebounds, Construction Spending Up

A closely watched gauge of manufacturing activity showed its strongest growth since April 2006, while a separate report showed construction spending also rose, providing further proof that the economy may be turning around.

The U.S. manufacturing sector grew in October for the third consecutive month and at a faster rate than was expected, according to an industry report released on Monday.

The Institute for Supply Management said its index of national factory activity rose to 55.7 in October from 52.6 in September. The median forecast of 74 economists surveyed by Reuters was for a reading of 53.

The October reading was the highest since 56.0 in April 2006.

A reading below 50 indicates contraction in the manufacturing sector, while a number above 50 means expansion.

Meanwhile, U.S. construction spending made its largest gain in a year in September, the Commerce Department said on Monday, bolstered by a record pace in public construction and the biggest increase in private residential building in more than six years.

The Commerce Department said spending on construction projects rose 0.8 percent to $940.3 billion, after dropping 0.1 percent in August. Spending originally was reported as rising 0.8 percent in August.

Analysts polled by Reuters had expected spending to fall 0.2 percent.

Public construction, fueled by billions of dollars of capital works spending in the U.S. economic stimulus plan, rose 1.3 percent to $326.4 billion, an all-time high, after falling 1.1 percent in August. State and local construction, which was up 1.4 percent after being down 0.5 percent in August, also reached an all-time high.

Home building rose 3.9 percent, its largest gain since rising 4.2 percent in July 2003, in a sign that strength may be returning to the devastated housing market. The prior month's increase was revised down to 3.8 percent from the previously reported 4.7 percent.

The Commerce Department said spending on construction projects rose 0.8 percent to $940.3 billion, after dropping 0.1 percent in August. Spending originally was reported as rising 0.8 percent in August.

Analysts polled by Reuters had expected spending to fall 0.2 percent.

Public construction, fueled by billions of dollars of capital works spending in the U.S. economic stimulus plan, rose 1.3 percent to $326.4 billion, an all-time high, after falling 1.1 percent in August. State and local construction, which was up 1.4 percent after being down 0.5 percent in August, also reached an all-time high.

Home building rose 3.9 percent, its largest gain since rising 4.2 percent in July 2003, in a sign that strength may be returning to the devastated housing market. The prior month's increase was revised down to 3.8 percent from the previously reported 4.7 percent.