"The government closure didn't have much effect on manufacturing -- this is a modest pace of growth and fairly well-sustained"
- Terry Sheehan, an economic analyst at Stone & McCarthy Research Associates
Following a bunch of worse-than-expected data from the world's largest economy during the week, Friday's report showed a surprising rise in manufacturing output, showing country's factories were a major source of strength for the economy at the start of this year's last quarter. A monthly survey from the Institute for Supply Management showed a gauge of manufacturing activity soared to 56.4 in October, hitting the highest since April 2011, up from 56.2 a month earlier and outpacing analysts' estimates, who called for a 55.3 reading. The index moved further away from the 50 threshold that separates growth from contraction. This is a welcoming sign for the economy, as it reflects little impact of the 16-day long government shutdown on the manufacturers.
Also Friday, Fed's official James Bullard expressed his concerns that market reluctance to differentiate between Fed's adjustments to bond purchases and the policy rate represents significant challenge to the Fed to implement any shift in its monetary policy. Nonetheless, he admits that labour market's solid performance since September 2012 could warrant a cut in central bank's $85 billion stimulus programme. According to his estimates, the policy will remain at its effective lower bound until the unemployment rate fall below 6.5%, or in case inflation exceeds 2.5%, which is very unlikely to happen, taking into account weak inflationary pressure.
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