CHICAGO – Business activity in the U.S. Midwest expanded faster than expected in October, with new orders surging and hiring picking up as well, a report showed Monday.
The National Association of Purchasing Management-Chicago (search) business barometer rose to 62.9, its highest since July, from 60.5 in September. Economists had forecast the index to slip to 58.0. A reading above 50 indicates expansion.
The employment component of the index rose to 51.3 from 48.4 in September. Prices paid rose to 79.6 from 76.3, feeling the heat from high energy prices. New orders surged to 72.6 from 63.4 and were the highest since March.
"Between the move in the employment index and continued strength in new orders, it suggests that the economy should continue to expand in the near term," said Drew Matus, senior financial markets economist at Lehman Brothers (search).
Many view the NAPM-Chicago as an industrial indicator, even though service sector companies are also polled, because the Chicago region is relatively industrialized.
Some analysts have suspected that post-hurricane rebuilding in the U.S. Gulf region will boost business for Midwest factories. In that vein, order backlogs were the highest in a year.
The benchmark 10-year Treasury note (search) yield inched up to 4.57 percent from 4.56 percent just before the report while equities prices built on earlier gains and the dollar gained against the euro and the yen.
"It confirms the Fed's optimistic assessment of the U.S. economy, and essentially signals that the Fed's measured [monetary policy] tightening campaign will persist," said Alex Beuzelin, senior market analyst, Ruesch International.