Government Shutdown Failed to Impact Manufacturing

Index up highest in more than two years

What government shutdown?

That's what one might conclude from Friday's surprisingly upbeat report on U.S. factory activity: The closely followed ISM manufacturing index edged up in October to 56.4 -- the highest reading in 2 1/2 years.

Analysts were expecting the index, based on surveys of 400 purchasing managers, to show a drop from September as the 16-day partial federal shutdown and political brinkmanship over the debt ceiling heightened uncertainty, if not fears, about the economy. But the latest reading from the Institute for Supply Management marked the fifth straight month of increase and the highest since April 2011.

The details of the report were mixed. The figure on new orders, the most forward-looking element of the index, inched up to 60.6, with export orders showing a strong gain over the month. The employment component, however, dropped to 53.2 last month from 55.4 in September. And production also tailed off a bit. All the readings were comfortably above 50, the threshold separating expansion from contraction.