US manufacturing activity unexpectedly accelerated in October and automobile sales were strong, easing concerns of a significant moderation in economic growth in the fourth quarter.
The pick-up in manufacturing, which was driven by robust growth in new orders and production, suggested the economy was weathering a slowing of demand in major markets such as China and the euro zone.
Factory activity is now back at the 3-1/2-year high first reached in August.
"The overall growth outlook remains very resilient as the underlying strength in domestic demand clearly outweighs potential external headwinds," said Harm Bandholz, chief US economist at UniCredit Research.
The Institute for Supply Management said its index of national factory activity rose to 59 last month from 56.6 in September. The index is now within spitting distance of its cycle high of 59.3 reached in February 2011.
Any reading above 50 indicates an expansion in activity.
The improvement was broad-based, and the index topped even the most optimistic estimate on Wall Street. The gauge of export orders, however, slipped.
While US manufacturing is gaining steam, factories across Asia and the euro zone are sputtering.
Manufacturing activity hit a five-month low in China and continued to stagnate in the euro zone, separate reports showed.
Back in the United States, automakers reported their strongest October sales in years, even though top-seller General Motors missed expectations.
Sales were forecast to rise to an annual rate of 16.5 million units from 16.43 million units in September, according to a Reuters survey.
Prices for US government debt fell on the upbeat data, while the dollar rose against a basket of currencies. US stocks were mixed, with the Standard & Poor's 500 index touching an intraday record.
"It looks like the economy is going to close the year with a bang. This growth picture looks increasingly sustainable," said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.
The US economy expanded at a vigorous 3.5% annual rate in the third quarter, although a surprise decline in construction spending in September could lead to a downward revision of as much as two-tenths of a percentage point.
Still, more concerning had been data last week that showed weak consumer spending and business investment plans at the end of the quarter, which had fuelled worry about the risks of a sharp slowdown. Now, however, fourth-quarter estimates range as high as 3%.
