NEW YORK (CNN/Money) - U.S. manufacturing accelerated in October, the nation's purchasing managers said Monday, in a report that surpassed most forecasts on Wall Street.

The Institute for Supply Management (ISM) said its index of manufacturing activity jumped to 57 from 53.7 in September. It was the fourth straight month the ISM index was above 50, a number that indicates expansion in the sector.

Economists, on average, expected the ISM index to rise to 55.8, according to Briefing.com.

"This is the best report that we have seen in quite some time in terms of the overall strength of manufacturing," said Norbert Ore, chair of the ISM Manufacturing Business Survey Committee. "The picture continues to improve, and it appears that manufacturing will finish 2003 on a very positive note, assuming the recent trend continues."

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The ISM noted, however, that some parts of the manufacturing sector have yet to improve, based on comments from individual purchasing and supply managers that were still cautious.

"It appears that some industries are not yet experiencing the upturn," the ISM report said.

U.S. stock prices rose after the report while Treasury bond prices fell. Recent reports of strength in various regional manufacturing surveys had led many on Wall Street to anticipate the strong ISM report.

In a separate report, construction spending rose to record highs in September, the Commerce Department said.

In its report, ISM said its new orders index rose to 64.3 from 60.4 in September. The production index rose to 62.6 from 57.3 in September.

The employment index rose to 47.7 from 45.7 in September, indicating manufacturers were still cutting jobs, but at a slower pace.

"We're still seeing job cuts in manufacturing, and it's going to stay that way for some time," said Robert Brusca, chief economist at Native American Securities in New York.

Though the broader economy emerged from its latest recession in November 2001, according to the National Bureau of Economic Research, manufacturing's recovery has taken much longer. The sector has lost 1.3 million jobs since the end of the recession and 2.4 million since the recession began in March 2001.

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Many of those jobs will likely never return, despite stronger economic growth overall, which could pose political problems for President Bush in 2004 in key manufacturing states such as Ohio, Pennsylvania and Michigan.

In a hopeful sign for manufacturing, the ISM's inventories index rose a bit to 44.5 from 42.7 in September, a sign that manufacturers' shelves were still being emptied, but at a slower pace. The "customers inventories" index, however, plunged to 39 from 44.5 in September, matching the lowest reading for that index since the ISM started keeping track in December 1996.

Though many businesses are choosing to keep inventories lean, economists think they may be too lean and that businesses are soon going to have restock, which should boost production in the future.

"You can only run down inventory for so long," said Kevin Logan, chief economist at Dresdner Kleinwort Wasserstein.

Without a big drop in inventories in the third quarter, gross domestic product (GDP), the broadest measure of the economy, might have grown at a pace even faster than 7.2 percent, which was already the fastest clip since 1984. Stopping the bleeding of inventories could help give a boost to GDP in the fourth quarter, even though consumer spending is forecast to decline.

The ISM's prices index jumped to 58.5 from 56 in September, the 20th straight month commodity prices have risen.