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AP News

Ahead of the Bell: US Manufacturing

WASHINGTON (AP) — U.S. manufacturing likely expanded for the second straight month in October, but at a slow pace consistent with only modest economic growth.

Analysts forecast that the Institute for Supply Management's manufacturing index slipped to 51.1, down from 51.5 in September. Readings above 50 indicate expansion.

The ISM will release the report at 10 a.m. Eastern Thursday.

The report is the final look at U.S. manufacturing conditions before Tuesday's presidential election. The race has been heavily focused on the economy.

The survey was completed before Hurricane Sandy disrupted business activity along the East Coast and cut power to millions of homes, an ISM spokesman said.

Manufacturing grew in September for the first time since May, buoyed by a jump in new orders and greater production. Still, overall conditions remain weak. Over the past few months, businesses have cut spending on computers, industrial equipment and machinery. Exports have declined.

Businesses have grown more cautious for several reasons. Many are nervous about the economic outlook overseas. Europe's financial crisis has pushed much of the region into recession. That has cut into U.S. exports and corporate profits. Growth has also slowed in China, Brazil and other large developing countries.

Companies also fear large tax increases and big government spending cuts that will kick in next year if Congress fails to reach a budget deal to avert them.

Slowing business investment is weighing on economic growth. Company spending on equipment and software was flat this summer, the first quarter it failed to increase since the recession ended more than three years ago.

The economy grew at a 2 percent annual rate in the July-September quarter, up from 1.3 percent in the April-June quarter. Growth increased because of more consumer and government spending, although the rate is still too weak to rapidly spur job creation.

The decline in factory output has slowed overall job growth. Manufacturers added jobs for the first seven months this year but shed 38,000 positions in August and September.

The health of manufacturing has been a critical part of the presidential campaign.

President Barack Obama has touted his expansion of the auto bailout early in his term and says the auto industry's rebound is part of a broader recovery in manufacturing.

GOP nominee Mitt Romney has said he will help U.S. manufacturers by taking a tougher stance towards China. He says he will push China to let its currency rise in value, which would make its exports more expensive and therefore less competitive. He also says he would crack down on counterfeit goods from China.

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