The U.S. economy showed mixed signs at the beginning of last week. Industrial Production data for September presented an impressive 0.6% increase. Manufacturing Production, on the other hand, presented only a negligible 0.1% increase, versus expectations for 0.3%. This was the result of increases in carmakers' output withheld by declines in furniture, appliances and computers.
Wednesday presented growing anticipation to the publishing of Fed’s rate decision. As expected, the announcement did not suggest tapering is imminent by any means, yet noted that the U.S. economy is expanding at a moderate pace. As monthly purchases were kept at the usual 85 billion Dollars a month, the statement did suggest that the Government shutdown did not cause major damage to the economy. While in the September announcement the Fed was concerned that the higher market rates could lead to slower improvement in the economy, the same was not mentioned in Wednesday’s announcement.
Thursday was probably the surprise of the week. In Chicago, it seems that no bad impact was recorded from the government shutdown, as the Chicago Purchasing Managers’ Index surged to a 31-month high. However, it was interpreted as bad news by equity markets, which saw the good figure as something that could induce a sooner QE3 tapering by the Fed. Whether Chicago is the prophet for an emerging U.S. economy or whether we are just going to see a surge of inventories next month, is yet to be seen.
The hectic week concluded on Friday with the publishing of the ISM manufacturing survey. Similar to the Fed’s announcement, survey participants did not identify impact on their business from the Government’s shutdown as the survey presented an impressive figure of 56.4, beating expectations for a 55.0 print, with exports surging 5 points to 57. However, unlike Thursday’s equity pessimism due to concerns of resulting tapering, Friday marked quite a positive day for equities with the Dow presenting a 0.45% daily increase, and the S&P 500 index with a 0.29% increase.
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