November 2, 2013 in Business

U.S. manufacturing shrugs off shutdown

Don Lee McClatchy-Tribune

WASHINGTON – What government shutdown?

That’s what one might conclude from Friday’s surprisingly upbeat report on U.S. factory activity: The closely followed ISM manufacturing index edged up in October to 56.4, the highest reading in 2 1/2 years.

Analysts were expecting the index, based on surveys of 400 purchasing managers, to show a drop from September as the 16-day partial federal shutdown and political brinkmanship over the debt ceiling heightened uncertainty, if not fears, about the economy. But the latest reading from the Institute for Supply Management marked the highest since April 2011.

The details of the report were mixed. The figure on new orders, the most forward-looking element of the index, inched up to 60.6, with export orders showing a strong gain over the month. The employment component, however, dropped to 53.2 last month from 55.4 in September. And production also tailed off a bit. All the readings were comfortably above 50, the threshold separating expansion from contraction.

All in all, the ISM report was one of the most encouraging pieces of economic news in the wake of the government shutdown. It suggests that economic output in the fourth quarter could be better than the forecasts for anemic performance.

That could mean stronger job growth, which, if it materialized, could spur the Federal Reserve to start reducing its bond-buying stimulus at its meeting next month, instead of waiting until next year as many economists are expecting.

Some analysts viewed the latest ISM data cautiously. The ISM reports have tended to paint a more optimistic picture of U.S. manufacturing than the Fed’s monthly industrial production data, wrote Cliff Waldman, senior economist for the Manufacturers Alliance for Productivity and Innovation.

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