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US manufacturing sector activity expanded in October for the third consecutive month and was at the highest level since April 2006.

The overall US economy grew for the sixth consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

Norbert J. Ore, chair of the Institute for Supply Management Manufacturing Business Survey Committee commented: "The manufacturing sector grew for the third consecutive month in October, and the rate of growth is the highest since April 2006 when the PMI registered 56 percent.

The jump in the index was driven by production and employment, with both registering significant gains. Production appears to be benefiting from the continuing strength in new orders, while the improvement in employment is due to some callbacks and opportunities for temporary workers. Overall, it appears that inventories are balanced and that manufacturing is in a sustainable recovery mode."

Performance by industry

In October, 13 of the 18 manufacturing industries reported growth. The industries - - listed in order - - are: Petroleum & Coal Products; Apparel, Leather & Allied Products; Furniture & Related Products; Chemical Products; Computer & Electronic Products; Transportation Equipment; Plastics & Rubber Products; Machinery; Food, Beverage & Tobacco Products; Printing & Related Support Activities; Fabricated Metal Products; Electrical Equipment, Appliances & Components; and Paper Products. The three industries reporting contraction in October are: Nonmetallic Mineral Products; Primary Metals; and Wood Products.

PMI

The recovery in manufacturing strengthened in October as the PMI (Purchasing Managers' Index) registered 55.7 percent, which is 3.1 percentage points higher than the 52.6 percent reported in September, and the highest reading for the index since April 2006 (56 percent). A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A PMI in excess of 41.2 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the sixth consecutive month in the overall economy, as well as expansion in the manufacturing sector for the third consecutive month. Ore said: "The past relationship between the PMI and the overall economy indicates that the average PMI for January through October (44.6 percent) corresponds to a 1.1 percent increase in real gross domestic product (GDP). However, if the PMI for October (55.7 percent) is annualized, it corresponds to a 4.5 percent increase in real GDP annually."