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US Factory Activity Index Down

US Factory Activity Index DownUS Factory Activity Index Down

A measure of US factory activity retreated from a 13-1/2-year high in October as the boost from hurricane-related supply disruptions faded, but continued to point to strengthening manufacturing conditions.

Other data on Wednesday showed a surge in private sector hiring, indicating that job growth rebounded last month after being depressed in September as hurricanes Harvey and Irma left some workers temporarily unemployed, Reuters reported.

Manufacturing and labor strength likely keep the Federal Reserve on track to increase interest rates in December. The US central bank is not expected to raise rates when policymakers conclude a two-day meeting later on Wednesday.

The Institute for Supply Management  said its index of national factory activity slipped to a reading of 58.7 last month from 60.8 in September, which was the highest since May 2004. A reading above 50 in the ISM index indicates growth in manufacturing, which accounts for about 12% of the US economy.

September’s jump in the index was driven by supply chain disruptions, especially in the chemical products sector. The supply bottlenecks, which also pushed up prices of raw materials, resulted in a longer delivery times. Longer suppliers’ delivery times are normally associated with increased activity, which is a positive contribution to the ISM index. The ISM’s supplier deliveries sub-index fell to 61.4 last month after soaring to 64.4 in September.

The survey’s prices paid sub-index dropped to 68.5 after racing to 71.5 in September, which was the highest reading since May 2011. The production sub-index slipped 1.2 points to a reading of 61.0 in October and a gauge of new orders fell to 63.4. A measure of factory employment dipped to 59.8 from 60.3 in September, which was the highest level since 2011.

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