ISM manufacturing index eases back from September's 13-year high

Growth in the US economy's manufacturing sector eased back a little more than expected in October, according to data from the US Institute for Supply Management.

The ISM's headline manufacturing index fell to 58.7 from 60.8 in September, missing expectations for a smaller decline to 59.5.

The new orders index fell to 63.4 from 64.6, while the production index dropped to 61.0 from 62.2. Meanwhile, the employment index ticked down to 59.8 from 60.3.

Pantheon Macroeconomics economist Ian Shepherdson said it was always going to be a struggle to match September's 13-year high, pointing out that this is a "very strong" report nonetheless.

"The hard data, especially manufacturing output, have lagged behind the survey in recent months. We're assuming that a good part of the shortfall is due to the hurricanes, and we're expecting a much stronger Q4. We see no reason to expect a serious weakening in the trend in the ISM anytime soon. Global demand is strong, the dollar is competitive, and domestic spending on capital equipment is rising rapidly."

Capital Economics economist Michael Pierce said the small drop in the ISM index is "little to worry about" and still indicates that manufacturing production will bounce back in the fourth quarter.

"The index remains at a very high level and consistent on past form with manufacturing output expanding by close to 4% annualised in the fourth quarter, after falling outright in the third quarter."