* PMI at 12-month low, signalling only modest manufacturing growth
* Output contracts for the first time since September 2009
* New order growth weakest in six months
* Modest rise in employment
Here is why output crashed:
A number of manufacturers linked lower levels of output to a weaker trend for new orders. Incoming new work increased modestly in October, but at the slowest rate in six months. The easing in the rate of total new order growth generally reflected weaker domestic demand, according to panellists. New export orders increased over the month, but the rise was marginal and followed a similarly sized reduction in September.
Chris Williamson, Markit's Chief Economist, basically said the government shutdown disrupted the economy and it's too early to know if it bounced back (emphasis mine):
“The flash PMI provides the first insight into how business fared against the backdrop of the government shutdown in October, and suggests that the disruptions and uncertainty caused by the crisis hit companies hard. The survey showed the first fall in manufacturing output since the height of the global financial crisis back in September 2009. We can expect GDP growth to have suffered a setback in the fourth quarter, but it is too early to estimate the extent of the slowdown. It is impossible to disentangle the impact of the shutdown from other factors that might have been at play during the month, so equally impossible to judge the extent to which business might bounce back in November.
“The Fed will be equally unsure of the underlying health of the economy, and will no doubt want to see the economic data stabilise, which could take until the end of the year, before making any firm policy decisions.”
So it looks like there will be no taper in 2013...
Everyone's Talking About How The Fed Blew Its Chance To Taper (Business Insider)
Barclays abandons 2013 taper call, joins others seeing March move (MarketWatch)
Tough to make taper call at December Fed meeting: Chicago Fed President Charles Evans (Reuters)