By: Dr. Mike Campbell
It’s high time for some better news to emerge from the world’s largest economy. This may have come in the shape of better manufacturing and export figures as the effect of the weaker Dollar begins to feed through, data for October reveal.
Institute for Supply Management (ISM) data shows that US output has grown for the 15th straight month. The ISM index rose from 54.4 in September to 56.9 last month. A figure above a value of 50 is indicative of growth. Analysts had predicted that the index would remain largely unchanged, so such a strong rise was quite unexpected.
US imports fell (the weakening Dollar makes imports more costly) whilst exports enjoyed a boom as they benefited from being cheaper in their exports markets. On the flip-side of the coin, US personal income and consumer spending both fell in October which leads to weaker domestic demand for US products. US personal income suffered a fall of 0.1% (on an annualised basis) over the August figure in September which was the worst fall in 14 months.
Data also suggests that Americans are saving less of their income as they use potential savings to augment their spending. The figure fell from an average of 5.6% of income being committed to savings in August to 5.3% last month.
The US construction industry is still sluggish. Despite a 0.5% increase over the August data – which was the worst seen since July 2000 – construction spending is 34% below peak activity seen in 2006.
All eyes will be on the Federal Reserve Monetary Policy Committee when it determines interest rates this week and decides in a further round of quantitative easing will be needed to spur the sluggish US economy.