Manufacturing Expands Through October Despite Government Shutdown

Manufacturing

Source: http://www.flickr.com/photos/usnationalarchives/

Manufacturing conditions in the U.S. continued to improve in October despite the 16-day partial government shutdown. How much they improved, though, depends on whom you ask.

According to the Institute for Supply Management, which released the October reading of its Manufacturing Report on Business on Friday morning, business activity within the manufacturing sector actually accelerated for the month. Its headline purchasing managers’ index increased from 56.2 to 56.4, its fifth consecutive month of growth. New orders increased fractionally to 60.6, although the index for production fell from 62.6 to 60.8. The index for employment showed decelerated growth at 53.2, but growth nonetheless.

The shutdown seems to have had an inconsistent affect on the overall industry. Executives from textile mills report that “new business is booming,” while fabricated metal products report that the “government shutting down and threatening to go into a default position is causing all kinds of concerns in our markets.” Transportation equipment manufacturers report that “government spending continues to be slow in defense and military,” but that “the government shutdown and debt ceiling crisis did not affect business.”

Markit Economics, on the other hand, reports that manufacturing sector growth decelerated in October. Its headline PMI index fell from 52.8 to 51.8 on the month, still indicating growth but at a more modest rate. The component index for output fell dramatically from 55.3 to 50.6. New order growth also decelerated, with the index falling from 53.2 to 52.7. More importantly, though, the index for employment grew, climbing from 51.3 to 52.7. The ISM component index for employment showed decelerated growth, falling from 55.4 to 53.2.

In its October payroll growth report, ADP showed that the manufacturing sector added 5,000 jobs for the month. This is particularly encouraging for the manufacturing sector because overall payroll growth of 130,000 was relatively weak. Manufacturing added just 1,000 jobs in September, and 5,000 in August.

U.S. equity markets advanced on Friday, buoyed at least in part by the favorable manufacturing data. Data released earlier in the month painted a somewhat more grim picture of manufacturing conditions, causing many market watchers to brace for underwhelming reports.

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