Oct 3, 11:06 AM EDT

US factory activity picked up in September

AP Photo
AP Photo/Ted S. Warren

Latest Business News
RBS says earnings rise 61 percent

China's overseas takeover spree meets growing resistance

All-Australian consortium withdraws bid for cattle empire

Asian shares mixed as dollar gains against yen, China yuan

L-3 Communications, GNC, Ford fall and Bristol-Myers jumps

A district summary of the Beige Book
Measuring economic stress by county nationwide
Mall malaise: shoppers browse, but don't buy
Unemployment by the numbers
Family struggles with father's unemployment
Saying an affordable goodbye
Hard times hit small car dealer
Latest Economic News
Egypt squeezed between need for reforms and fear of backlash

British economy grows more than expected after Brexit vote

IMF, US Treasury chiefs visit Gulf amid oil price slowdown

ECB chief: low interest rates don't make inequality worse

German businesses upbeat despite bank woes, British EU exit

Policy Prescriptions: Trump and Clinton on economic growth

WHY IT MATTERS: Wall Street Regulation

AP FACT CHECK: Trump's trashing of US economy is misguided

AP Interview: IMF says low oil prices still hurting Mideast

China economic growth holds steady as retail spending rises

Interactive about job growth
Quiz for Older Job Seekers
Who Has Lost the Jobs? A State by State Look
Greece's Debt Threatens to Spread
State budget
gaps map
Auto industry problems trickle down, punish Tennessee county
Women give old Derby hats a makeover in tough economy
S.C. town deals with highest unemployment in South
How mortgages were bundled and sold as securities
Tracking the $700 billion financial bailout
Tracking the year's job losses
State-by-state foreclosures since 2007
Credit crisis explained
Presidents and their economic legacies
Lexicon of the financial crisis
Americans' addiction to debt

WASHINGTON (AP) -- U.S. manufacturing rebounded in September after contracting in August. New orders and production at factories increased, although employment fell - a sign that manufacturers have yet to fully stabilize after a difficult year.

The Institute for Supply Management said Monday that its manufacturing index rose to 51.5 in September from 49.4 in August. Any reading above 50 signals expansion.

U.S. factories have faced a brutal slowdown over the past year. The strong dollar made their goods less affordable overseas, hurting exports. Lower oil prices caused energy companies to cut back on orders of equipment and pipeline. Auto sales have also leveled off this year after reaching a record level in 2015. The result has been layoffs and declining levels of production, with the ISM index being among the few signs of recovery until August when the index showed a manufacturing pullback.

The ISM manufacturing index looked a bit mixed in September despite the expansionary reading.

"The bottom line is that the manufacturing sector still faces challenging conditions," said Richard Moody, chief economist at Regions Financial.

A measure of employment was 49.7, its third straight month of decline. That is a sign manufacturers are laying off workers. Bradley Holcomb, chair of the ISM manufacturing business survey committee, said factories are able to produce goods at current or even higher levels without additional workers, so the groups expects "little, if any, gains" in jobs.

And of the 18 industries tracked in the report, 11 reported contraction, including the petroleum, wood, apparel, machinery, fabricated metals and transportation equipment sectors.

New orders climbed into positive territory with a 55.1 reading, after declining in August.

Other reports show that manufacturing still faces challenges.

Orders for durable goods were nearly flat in August, with an $85 million fall from July to $226.9 billion, the Commerce Department said last week. The tick down mostly stemmed from a steep 21.9 percent drop in the volatile category of commercial aircraft. Total orders have slipped 0.6 percent so far this year to $1.8 trillion.

Factory productivity dropped 0.4 percent in August, the Federal Reserve said in a recent report. Cutbacks occurred at makers of appliances, home electronics and machinery. This slowdown has led factories to shed 30,000 workers in the past year. A broader measure of industrial output, which includes mines and utilities, also dropped 0.4 percent, the Fed said.

© 2016 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy and Terms of Use.