US manufacturing activity was surprisingly robust in September as new orders jumped in the aftermath of Hurricane Katrina, while August construction spending rose at a record rate, data released on Monday showed.
The Institute for Supply Management said its monthly indexes of manufacturing activity for September was 59.4, well above average expectations of a drop to 52.0 and the 53.6 level seen in August.
However, ISM cautioned that the jump was primarily driven by demand following the hurricane, which devastated the Gulf of Mexico coast at the end of August, and that the impact likely would be temporary.
"The flurry of activity and the strength of new orders - I don't think that is a business cycle issue, that is an event-cycle issue driven by the storm," said Norbert Ore, chair of the ISM business survey committee.
Within the overall index, the new orders component rose to 63.8 in September from 56.4 in August, while the prices paid portion of the index jumped to 78.0 from 62.5.
The rise in prices paid was seen by financial markets as heralding increasing inflation, which will likely spur the Federal Reserve to keep raising interest rates.
The rise in the prices component also was a reflection of soaring energy costs and could prove fleeting, Ore said.
The increase in manufacturing follows closely on the heels of other data pointing to healthy factory activity shortly after the hurricane.
Data last week showed business activity in the US Midwest bounced back strongly in September, with traders saying hurricane-related new orders helped boost the National Association of Purchasing Management-Chicago business index.
Also, the National Association of Purchasing Management-New York said last week its business conditions index rose to its highest level in at least eight years.
Meanwhile, prior to the hurricane, August construction spending grew by 0.4 percent to a record $1.109 trillion rate versus a revised increase of 0.3 percent in July, according to a report by the Commerce Department. The rise matched economists' expectations.
The department said Katrina had no impact on the month's numbers and that its impact for the full year 2005 on US construction spending was likely to be "minimal".
This is because the hardest-hit states - Louisiana, Mississippi and Alabama - accounted for slightly more than 3 percent of total construction spending last year, the government said.