U.S. manufacturing grew strongly in October, a sign that the government shutdown and debt limit fight earlier in the month did not derail the tepid-but-resilient private-sector recovery.
The Institute of Supply Management announced Friday that its index of manufacturing activity rose to 56.4 percent for October, edging up from September's 56.2 strong number and easily beating analysts' expectations. A reading above 50 indicates expansion. Friday's level was the highest since April 2011.
Private-sector firms have estimated that the government shutdown and debt limit standoff could cut fourth-quarter growth by 0.2 and 0.6 percentage points, on an annualized basis. Most of those estimates, however, were based only on the amount of federal spending missed during the shutdown or on a guess of how much the plunge in consumer confidence leading up to the vote to raise the debt ceiling depressed consumer spending.
White House economic advisers used a methodology of their own construction to attempt to capture some of the other effects the episodes had on the economy. They estimated that the total damage would be 0.25 percentage points of yearly growth in the fourth quarter, and slower job growth by 120,000 in October.
Friday's ISM index, however, is one of the first major releases of economic data giving direct evidence on the health of the private sector to come out since the government shutdown.
The increase was presaged Thursday by an ISM report on the Chicago-area economy specifically. Business activity in Chicago soared during October, with the index coming in at 65.9, far higher than the 55 expected.
Normally, the most closely watched economic indicator — the Bureau of Labor Statistics' jobs report — would have been released Friday morning, the first Friday of the month. Because the Labor Department was partly shut down earlier in the month, that report is delayed until Nov. 8 to allow workers to collect data. That report will give a first indication of whether employers put off hiring because of uncertainty over federal policy.
ISM, an association for the supply management industry, surveys American company executives to gauge the strength of the economy, and of manufacturing in particular. Trends in ISM reports are closely watched by investors and by officials at the Federal Reserve.