Chicago Purchasing Managers Say Activity Accelerated

Business activity in the U.S. unexpectedly accelerated in October, signaling corporate and consumer spending are holding up after the economy expanded at a faster pace in the third quarter.

The Institute for Supply Management-Chicago Inc. said today its business barometer rose to 60.6 this month from 60.4 a month earlier. Figures greater than 50 signal expansion. Output climbed at the fastest pace in five years.

Manufacturing remains at the forefront of the recovery as firms upgrade equipment and boost output to meet domestic and foreign demand. The figures are unlikely to alter investors’ expectations that Federal Reserve policy makers next week will announce renewed asset purchases to spur growth.

“Companies are still increasing their production schedules and not just to restock store shelves,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. “As production moves higher, eventually more workers will be added to staff.”

The median forecast of 60 economists surveyed by Bloomberg News projected the gauge would fall to 58. Estimates ranged from 52.6 to 62.6.

The economy grew at a 2 percent annual rate in the third quarter, preliminary figures from the Commerce Department also showed today. The increase in gross domestic product compares with 1.7 percent growth in the second quarter.

Less Confidence

The Thomson Reuters/University of Michigan final index of U.S. consumer sentiment fell to 67.7 in October from 68.2 a month earlier, another report today showed. Economists had forecast a reading of 68, according to the median of 63 estimates in a Bloomberg News survey. Projections ranged from 67 to 70.

Stocks were little changed after the reports, hurt by the drop in confidence. The Standard & Poor’s 500 Index was at 1,184.26 at 10:07 a.m. in New York. Treasury securities rose, sending the yield on the benchmark 10-year note down to 2.62 percent from 2.66 percent late yesterday.

The Chicago group’s production gauge climbed to 69.8, the highest level since March 2005, from 64.3 in September. The gauge of new orders rose to 65, the highest since April, from 61.4. The employment measure increased to 54.6 from 53.4 in September.

Auto Pickup

Automakers including Dearborn, Michigan-based Ford Motor Co. are among manufacturers seeing sales and profits pick up.

Ford, the world’s most profitable automaker, posted a 46 percent increase in September sales from a year earlier, while it reported third-quarter net income of $1.69 billion, the most in its 107-year history. Ford said fourth-quarter production will rise to 1.35 million globally, about 89,000 more than in the third quarter.

“That’s already a solidly profitable year, and we’re confident we’ll be solidly profitable next year as well,” Lewis Booth, Ford’s chief financial officer, said in an interview. Oct. 26.

Economists watch the Chicago index and other regional manufacturing reports for an early reading on the outlook nationally. The Chicago group says its membership includes both manufacturers and service providers, making the gauge of measure of overall growth. Its members have operations across the U.S. and abroad.

Regional Reports

Today’s report corroborated other measures of manufacturing that showed a pickup. Regional Fed surveys earlier this month showed New York-region factories expanded in October at the fastest pace in four months, while those in the Philadelphia area grew after two months of contraction.

The ISM’s monthly national factory index, due Nov. 1, may drop to 54 in October, the lowest reading in 11 months, from 54.4 the prior month, according to the median forecast of economists surveyed.

The economy is a top issue for voters in next week’s congressional elections, and polls show the public is increasingly skeptical of President Barack Obama’s performance.

To contact the reporters on this story: Bob Willis in Washington bwillis@bloomberg.net;

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net.

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