Manufacturing sector expands more than expected in October

October ISM hits 56.4
An employee grinds steel components at the Ellicott Dredges LLC manufacturing facility in Baltimore, Maryland.
Andrew Harrer | Bloomberg | Getty Images

The U.S. manufacturing sector expanded at its fastest pace in 2½ years last month, an industry report showed Friday, but the pace of hiring slowed from September.

The Institute for Supply Management (ISM) said its index of national factory activity rose to 56.4 in October—its best showing since April 2011—from 56.2 the prior month. A reading above 50 indicates expansion.

Growth edged up despite the partial government shutdown during the first 16 days of the month. October was the fifth-consecutive month of quicker growth in the goods-producing sector since it contracted in May.

The forward-looking new orders index edged up to 60.6 from 60.5, but the employment index slipped to 53.2 after hitting a 15-month high of 55.4 in September. Production eased to 60.8 from 62.6.

Job growth in the broader economy was tepid in September, and economists polled by Reuters expect a government report due on Nov. 8 to show hiring slowed further in October.

Earlier this week, ISM said its regional Chicago business barometer hit its highest level since March 2011, well above the most optimistic forecast in a Reuters poll, as new orders surged to a nine-year high.

The latest ISM report was far more upbeat than a separate index released Friday by financial data firm Markit, which hit a one-year low in October.

(Read more: US factory activity tumbles to one-year trough: Markit)

The two surveys use some different methodologies, including one related to seasonal adjustment.

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