Nov. 2 (Bloomberg) -- Factories in the U.S. probably grew at a faster pace, while the number of people signing contracts to buy houses showed no improvement, signaling a shift to manufacturing as the driver of the expansion, economists said before reports today.

The Institute for Supply Management’s manufacturing index rose to 53 in October, the highest level in three years, according to the median forecast of 62 economists surveyed by Bloomberg News. Another report may show pending home sales in September were unchanged, the first time since January they didn’t increase.

Increasing demand, boosted in part by the administration’s “cash-for-clunkers” plan, has led to a record plunge in stockpiles that may keep assembly lines humming. After rising last quarter at the fastest pace in two decades, home building will probably cool as uncertainty over another government initiative, the first-time buyer tax credit, slows sales.

“Manufacturing is back in expansion territory on a sustained basis,” said Adam York, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “The recovery in housing is going to be gradual. The economy will be growing, but this isn’t necessarily going to be a great quarter.”

The Tempe, Arizona-based ISM group’s report is due at 10 a.m. New York time. Forecasts ranged from 52 to 55, after a reading of 52.6 in September. Fifty is the dividing line between expansion and contraction. Manufacturing accounts for about 12 percent of the economy.

Global Recovery

Factories worldwide are starting to raise output. Chinese manufacturing expanded at the fastest pace in 18 months in October, bolstered by exports, a purchasing managers’ index showed today. Europe’s manufacturing industry grew for the first time in 17 months, a separate report showed.

Pending U.S. home sales, due from the National Association of Realtors at 10 a.m., jumped 6.4 percent in August. Survey estimates for September ranged from a drop of 2 percent to a gain of 5.5 percent.

While falling prices and low mortgages rates have steadied demand, some buyers are waiting while lawmakers debate whether to extend the $8,000 tax credit that has helped housing emerge from its worst slump in eight decades.

Also at 10 a.m. today, a Commerce Department report may show spending on construction projects fell 0.2 percent in September, the seventh decrease this year, according to the survey median.

S&P 500

The Standard & Poor’s 500 Index fell last week, marking the first monthly drop since February, after reports prompted concern that consumers will restrain the economic recovery.

Reports on manufacturing have shown improvement. The ISM- Chicago Inc.’s business barometer rose in October to the highest level in 13 months, the group reported last week. Gains in the gauges for new orders, production and backlogs signaled the recovery will persist.

Regional Federal Reserve Bank reports showed manufacturing in the New York district expanded in October for a third month and grew in the Philadelphia region at a slower pace.

Texas Instruments Inc., the second-largest U.S. chipmaker, is among companies saying the future looks brighter. The Dallas- based company forecast fourth-quarter profit and sales that beat the average estimate of analysts surveyed by Bloomberg, indicating demand for electronic components is recovering further.

“Our customers are winding down their inventory corrections and have begun to increase production levels in their factories,” Chief Executive Officer Rich Templeton said in a statement on Oct. 19.

                        Bloomberg Survey

===============================================================
                               ISM  Construct  Pending
                              Manu  Spending    Homes
                             Index     MOM%     MOM%
===============================================================
Date of Release              11/02    11/02    11/02
Observation Period            Oct.    Sept.    Sept.
---------------------------------------------------------------
Median                        53.0    -0.2%     0.0%
Average                       53.2    -0.2%     0.2%
High Forecast                 55.0     0.5%     5.5%
Low Forecast                  52.0    -1.0%    -2.0%
Number of Participants          62       39       31
Previous                      52.6     0.8%     6.4%
---------------------------------------------------------------
4CAST Ltd.                    54.0     0.1%    -2.0%
Action Economics              53.0    -0.6%     0.4%
Aletti Gestielle SGR          52.8     ---      ---
Ameriprise Financial Inc      53.5    -0.4%    -2.0%
Bank of Tokyo- Mitsubishi     53.9     0.0%     ---
Barclays Capital              54.0    -0.2%    -2.0%
Bayerische Landesbank         53.0    -0.5%     ---
BBVA                          53.8    -0.5%     0.5%
BMO Capital Markets           53.0    -0.1%     0.0%
BNP Paribas                   53.0     ---      ---
BofA Merrill Lynch Resear     54.0    -0.4%     ---
C I T I C Securities          53.0     ---      ---
Calyon                        54.0     ---      ---
Capital Economics             53.5     0.5%    -1.5%
CIBC World Markets            53.0     ---      ---
Citi                          52.0    -0.5%     ---
ClearView Economics           53.5     0.0%     5.0%
Commerzbank AG                53.5     ---     -1.0%
Credit Suisse                 52.5    -0.6%     ---
Danske Bank                   54.0     ---      ---
DekaBank                      52.0     0.0%    -0.5%
Desjardins Group              52.5    -0.4%     ---
Deutsche Bank Securities      53.0     0.4%     3.0%
Deutsche Postbank AG          53.0     ---      ---
Exane                         53.5     0.2%    -2.0%
First Trust Advisors          53.5     0.1%     ---
Fortis                        53.5     ---      1.2%
Helaba                        54.0     ---      ---
Herrmann Forecasting          53.1     0.4%    -1.2%
HSBC Markets                  54.0    -0.2%     0.5%
IDEAglobal                    54.0    -0.2%    -1.0%
Informa Global Markets        55.0     ---      5.5%
ING Financial Markets         52.0    -1.0%     0.0%
Intesa-SanPaulo               53.2     0.0%     ---
J.P. Morgan Chase             53.0     0.1%     0.0%
Janney Montgomery Scott L     53.5     0.0%     0.8%
Jefferies & Co.               52.0    -0.2%     ---
Landesbank Berlin             53.2    -0.8%     ---
Landesbank BW                 52.0     0.0%     ---
Maria Fiorini Ramirez Inc     53.0     ---      ---
Moody’s Economy.com           53.6     0.3%    -0.5%
Morgan Keegan & Co.           ---     -0.3%     ---
National Bank Financial       53.0     ---      ---
Natixis                       53.0     ---      ---
Newedge                       53.2     ---      ---
Nomura Securities Intl.       53.0     ---      ---
Nord/LB                       52.5     ---      ---
PNC Bank                      53.0     0.0%     ---
RBC Capital Markets           52.0     ---      ---
Ried, Thunberg & Co.          52.6    -0.5%     2.0%
Schneider Foreign Exchang     52.5     ---     -1.3%
Scotia Capital                53.5     ---     -1.0%
Societe Generale              53.0     ---      ---
Stone & McCarthy Research     52.7    -0.2%     ---
TD Securities                 54.0     ---      1.5%
Thomson Reuters/IFR           55.0     ---     -0.3%
UniCredit Research            53.0     ---      ---
University of Maryland        52.0    -0.5%     0.4%
Wells Fargo & Co.             53.8    -0.2%     ---
WestLB AG                     52.0    -0.3%     0.8%
Westpac Banking Co.           53.2    -0.8%    -2.0%
Woodley Park Research         52.3    -0.6%    -0.1%
Wrightson Associates          52.6    -0.5%     2.0%
===============================================================

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

Last Updated: November 2, 2009 06:18 EST