Manufacturing bounces back after three months of contraction

The president and Republican presidential nominee Mitt Romney could broach the issue during their first debate, scheduled for Wednesday night. 

Obama has chided Romney for saying he would have let the auto industry go bankrupt during the economic downtown. And the GOP candidate, as well as his supporters, has prodded the president for more details on how he would create 1 million jobs in the sector. 

In a separate report, overall construction spending ticked down 0.7 percent but homebuilders increased their spending, providing another indication that the residential market is undergoing a recovery, the Commerce Department said Monday. 

New orders and employment drove the improvement in manufacturing, a sign that activity could pick up in the next few months, the ISM survey showed. 

New orders hit their highest level in five months, rising to 52.3, from a contracting 47.1, while the employment index ticked up to 54.7 from 51.6.

Exports contracted for the fourth straight month as the continuing financial crisis in Europe, and a slowdown in Asia, has led to a drop in demand for U.S. goods.  

In several recent business surveys, manufacturers expressed concern about the looming fiscal cliff, a mixture of expiring tax provisions and scheduled spending cuts, set to go into effect next year. 

They reported that they are holding back on hiring until Congress can resolve the issues. 

Manufacturers cut 15,000 jobs, according to the Labor Department's August jobs report. The next report is set for release on Friday. 

Lawmakers will return to Washington after the elections in search of a solution. 

At this juncture, lawmakers are expected to, at least, extend the tax provisions and put spending cuts on hold until sometime next year. 

Business leaders say that even a short-term agreement would help their outlook and provide better certainty for decisions heading into 2013.