As the year-end and holidays are approaching, researchers and economists are trying to determine if the unanticipated government shutdown of 16 days in October had an impact on the sales and operations of various sectors.
The Purchasing Managers Index (PMI) is a composite index by the Institute for Supply Management (ISM) that reflects the economic health of the manufacturing sector. It is based on five main sub-indexes, including new orders, inventory levels, production, supplier deliveries and employment environment. A PMI of more than 50 indicates expansion of the sector, whereas a reading under 50 represents a contraction.
The ISM reported that the manufacturing PMI in October rose to 56.4 percent from 56.2 percent in September. The services sector, which accounts for the bulk of the U.S. economy, has been growing for 46 months straight, with a PMI reading above 50. A flash estimate in October by Markit Economics was expecting the PMI figure to come in at 51.5 at a 12-month low.
PMI Composite Index, 2013
“Despite all the grumbling out of Washington and from pundits claiming that the partial government shutdown would have significant effects on the economy, the private sector shrugged it off and continued to plow along.” ~FT Advisors economists
Sentiments from Various Companies
eBay: According to CEO, John Donahoe, the government shutdown came at a particularly unfortunate time, right at the beginning of the holiday shopping season. eBay reported third-quarter earnings that were lower than analyst predictions. Upon the announcement, company shares fell by more than 5%.
“[The shutdown] makes people a little more tentative about spending. It’s not massive, but on the margin, especially people that are trying to make their dollars stretch, they might be a little more conservative.” ~John Donahoe, CEO of eBay
Southwest Airlines: CFO Tammy Romo said that while third-quarter earnings were strong, the government shutdown is estimated to have cost the airline $20 million in revenue.
Wal-Mart: In areas with high concentrations of federal workers, sales at Wal-Mart stores lagged during the shutdown. The company previously expected a growth in net sales of five to six percent for 2013, but has revised these estimates to two to three percent.
US Airways:The airline felt the impact of the shutdown more than competitors, as Reagan National Airport in Washington D.C. serves as one of their hubs. With business travel for federal workers at a halt, the company saw overall bookings in late September and early October fall by about eight percent
What Happened to Job Numbers in October?
Job Growth Strong in October (Seasonally Adjusted).
During the month of October, when the government was shutdown for 16 days, total non-farm payroll employment rose by 204,000 and the unemployment rate stayed relatively stable at 7.3 percent, up from 7.2 percent in September. The largest employment increases were found in leisure and hospitality, retail trade, professional and technical services, manufacturing, and health care. Among the unemployed, the number on temporary layoff increased by 448,000 (a figure that includes furloughed federal workers).
Unemployment Rate, 2010 – 2013 (Seasonally Adjusted)