A measure of US factory activity contracted in September by the least in nearly a year, offering hope that the worst may be over for the nation's producers.

The Institute for Supply Management's manufacturing gauge rose to 49, the highest since November, from 47.6 the month before, according to data released Monday.

While readings below 50 indicate contraction, the latest figure exceeded most forecasts in a Bloomberg survey of economists. After hitting a multi-year low in June, the index has advanced 3 points to mark the biggest three-month gain since March 2021.

The September index was bolstered by the strongest production growth since July 2022 as well as an expansion in factory employment. The group's gauge of new orders, while still showing contraction, also rose to a more than one-year high.

The factory payrolls measure expanded for the first time in four months, allowing producers to make greater headway on order backlogs.

Producers are also finding relief in declining commodities prices. The group's index of prices paid for materials dropped 4.6 points, the most in four months, to 43.8 in September.

Though the manufacturing sector has been in contraction territory for nearly a year, the pace of deterioration is easing. Consumer spending remains somewhat resilient in the face of high borrowing costs and lingering inflation. Moreover, recent government data showed business demand for equipment rebounded in August.

Production growth may be sustained as companies make progress trimming inventories. A measure of customer stockpiles shrank at the fastest pace in three months, according to the ISM report. Factory inventories also contracted.

At the same time, a strike against the three largest US automakers risks slowing progress in the sector even as supply chains and prices continue to stabilize.

Source : Bloomberg