Following October’s Federal government shutdown, statistics measuring its impact have so far been few. No wonder, then, that the October labour market report received so much scrutiny. Non-farm payrolls soared by 204,000, while August and September figures were revised up to 238,000 and 163,000, respectively. The unemployment rate edged up from 7.2% in September to 7.3%, but this was attributed to government employees on furlough during the shutdown. Stocks fell briefly on the news because positive jobs data suggest that the Fed will start unwinding quantitative easing procedures sooner rather than later, and that will translate into less easy money for the financial sector. The employment data could also suggest that concerns over the impact of the shutdown may be unfounded. On the other hand, consumer confidence dropped sharply from a level of 80.2 in September to 71.2. Consumer activity is a major driver of economic growth, and the advance Q3 national accounts showed domestic demand waning. Personal consumption grew by 1.5% (q-o-q annualized), down from 1.9% in Q2 and 2.8% in Q1, while businesses cut back on spending in the uncertain climate. Non-residential investment slowed from a 4.7% jump in Q2 to only 1.6%. GDP growth did expand by 2.8% in annualized terms, though, up from 2.5% in the previous quarter and 1.1% in Q1, boosted by volatile inventories.
Non-military factory goods orders – a proxy for business spending trends – sank by 1.3% (m-o-m) in September, although overall factory orders rose by 1.7%, lifted by volatile aircraft sales. Elsewhere, production rose by 0.6% (m-o-m) in September on the back of a 4.4% surge in utilities. The 2014 industrial output forecast remains unchanged as does GDP.
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