Manufacturing activity strongest since April 2011

The improvement could be a sign that hiring could pick up. The employment index rose to 55.4 percent compared with August’s reading of 53.3 percent, which is the highest reading of the year. 

"This would be good news if true, particularly with manufacturers adding just 20,000 additional workers over the past year and several other reports, including the NAM/IndustryWeek Survey of Manufacturers, indicating only modest growth at best in terms of hiring," said Chad Moutray the chief economist for the National Association of Manufacturers (NAM).

The production index increased by 0.2 percentage point to 62.6 percent. After contracting in May, the index has posted three months of 60-plus readings.  

"The larger story is the progress acceleration in activity over the course of the past few months, with relatively strong growth in production and new orders," Moutray said.

Along those lines, the pace of new orders remained healthy despite a slight pullback from 63.2 to 60.5. Stronger sales activity should bode well for future output growth. 

The exports index eased from 55.5 to 52.0, suggesting a slight slow down in the growth of sales overseas.

"Overall, manufacturers wrapped up a pretty decent third quarter in terms of output and sales," he said. 

Still, amid the shutdown of the federal government, Moutray warned that continued fiscal stalemates will only hurt the prospect of more robust economic growth.

"Fiscal uncertainty is likely to limit economic growth — at least in the short-term — and we continue to see growth rates for manufacturing that, while better than in the spring, are still not as robust as we might like," he said. 

"With that in mind, this manufacturing report suggests movement in the right direction, but policymakers would be wise to move beyond the short-term budget battles and begin debating ways to grow our economy for the long-term."