U.S. Midwest business activity grows past expectations in October
(Reuters) – Business activity in the U.S. Midwest surged past expectations in October as new orders hit their highest level since 2004, countering recent evidence of soft economic growth.
Weekly unemployment claims also fell, in welcome news for the nation’s battered labor market after the impact of a government shutdown on furloughed federal workers diminished.
The Institute for Supply Management-Chicago business barometer jumped to 65.9 from 55.7, the strongest reading since March 2011 and well above the most optimistic forecast in a Reuters poll.
Initial claims for state unemployment benefits dropped by 10,000 to a seasonally adjusted 340,000, the Labor Department said on Thursday.
The U.S. job market has apparently slackened in recent months, with private-sector employers hiring fewer workers in October after uncertainty caused by budget brinkmanship in Washington dented confidence among both consumers and businesses.
Given that backdrop, analysts treated the ISM-Chicago numbers with some skepticism.
“The report may be exaggerating the extent of economic growth momentum,” said Millan Mulraine, director of research at TD Securities.
Financial markets showed little reaction to the figures, with stocks lower on investor caution following recent record highs. Treasury bonds were also down modestly.
Other recent data on hiring, factory output and home sales in September have suggested the economy lost a step even before the government shut down. Readings on consumer confidence this month have shown the fiscal standoff rattled households.
Anxious to maintain policy support while the economy works through this soft spot, the U.S. Federal Reserve on Wednesday extended its asset purchase campaign at a policy meeting that opted to keep buying bonds at a $85 billon monthly pace.
A 16-day partial shutdown of the federal government had pushed up claims in recent weeks as furloughed workers applied for benefits, but this factor appeared to be diminishing.
Claims filed by federal employees dropped 29,713 in the week ended October 19 to 14,423. The shutdown ended on October 17.
