WASHINGTON, Oct 3: The US industrial sector surprisingly accelerated in September, according to a new report on Monday that suggested the economy is coping well with the destructive impact of hurricane weather.
The Institute for Supply Management said its closely watched manufacturing index rose to 59.4 per cent from 53.6 per cent in August, its biggest jump since 1991 and its highest reading in over a year.
But in an indication of inflationary pressure that could concern the Federal Reserve, the ISM index of prices paid by manufacturers leapt from 62.5 per cent to 78.0 in September.
ISM survey chief Norbert Ore said that new orders and production rose significantly, supported by slower deliveries and growing backlogs of orders.
“While energy prices and the impact from Hurricane Katrina are major concerns, the manufacturing sector has regained significant momentum,” he said.
Katrina and its smaller sister Rita knocked out a major chunk of the US oil industry and have contributed to energy prices soaring ever higher. That should have hurt the industrial sector, as fuel and transport costs go up along with the prices of raw materials.
Katrina has already dealt a blow to US consumer confidence and spending, figures showed on Friday.
But the ISM report caused some analysts to rethink their appraisal of the eventual impact the hurricanes will have on the world’s biggest economy. Analysts had expected the ISM figure to cool to 52 per cent. Any number higher than 50 per cent indicates expansion. The US manufacturing sector has now expanded for 28 consecutive months.
Claymore Advisors senior economist Bill Mulvihill said the ISM report suggested that economic activity from the hurricane-affected areas along the Gulf Coast has shifted to other regions of the United States.
“This is a true testament to our highly flexible, free-market economy and the reason we believe the economic impact from Katrina will be temporary and much less than initial estimates,” he said.
Barclays Capital economist Dean Maki said the report indicated “the negative impact of the hurricanes on manufacturing activity was overwhelmed in September by strong underlying momentum in the manufacturing sector combined with positive rebuilding effects.”
“The report suggests that other manufacturing indicators like industrial production should pick up notably over the next few months,” he said.
But not everyone was convinced that the ISM report had dealt a decisive blow to Katrina concerns.—AFP
