"The economy still needs the support of a very accommodative monetary policy"
- William Dudley, Federal Reserve Bank of New York President
While American authorities are still debating whether the economy is strong enough to grow at a stable pace without any stimulus measures, a report from Markit Economics highlighted an unexpected weakness in the nation's manufacturing sector. Figures showed flash manufacturing PMI expanded to 52.8 this month, still reflecting an expansion in the sector; however, the figure is lower from August's 53.1 and well below analysts' expectations for a 54.0 reading. The sector is still driven by strong orders, which posted the fastest rate of growth in the preceding month. Further on the upside, companies are reporting on falling inventories on strong demand, which exceeds production.
Meanwhile, this week will be full of reports from Federal Reserve officials. Hence, New York Fed President Bill Dudley explained his decision to vote against the taper. He stressed out the economy failed both tests that he uses to evaluate economic performance. To begin the taper, the labour market must show significant improvement, while the second indicator is forward momentum that makes Dudley confident the improvement will persist in the future. He also noticed the United States have made a progress with respect to previously mentioned metrics; however, they are not achieved completely yet. And the recent manufacturing report may be a good indicator of it.
© Dukascopy Bank SA