"Another stronger-than-expected showing. The index is up sharply from 50.2, on average, in Q2. The data unambiguously point to a pick-up in the trend in manufacturing output growth."
- Jim O'Sullivan, chief US economist at High Frequency Economics
While the White House struggles to make compromise on the budget to avoid the prolonged government shutdown, the economy is sending positive signs, supporting the case of tapering of Fed's stimulus programme. On Tuesday, the Institute for Supply Management said the measure of manufacturing activity surged for the fourth consecutive months in September, expanding at the fastest pace since April 2011, hitting 56.2, up from 55.7 in August. The reading came above analysts' expectations, which projected a pullback to 55.0. However, a measure of new orders eased 2.7 points to 60.6 in September amid growing uncertainty regarding the QE and debt ceiling. The main reasons behind the strong performance are improvement in the labour market that propels consumer spending, along with stabilization in the global markets.
At the same time, the U.S. government has begun a partial shutdown for the first time in 17 years, potentially putting 800,000 federal employees out of work with no guarantee of back pay once the stalemate is over. The shutdown will cost the world's largest economy at least $300 million per day and a three-week shutdown may cut about 1.4% from the fourth quarter's GDP, diminishing gains in all sectors of the economy.
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