The US manufacturing sector shrank at its fastest pace in nine months in October, according to new figures this afternoon. The Chicago Purchasing Management Association said its index of regional business activity fell to 45.9 in October from 48.1 in the previous month. A reading below 50 signals a contraction in activity. This is the Chicago PMI's lowest reading since January and compares to forecasts for a slight rise in the index.
The figures follow the publication of data today which said the US economy grew by 3.1pc in the second quarter. Although this is well ahead of the 1.3pc growth in the second quarter, it was less than the 3.6pc rate expected and was also well shy of the 5.0pc growth seen in the first three months of the year. "And this just reiterates the point [that] the US is going see anaemic economic growth in 2002 - Q4 is anticipated to be even weaker than Q3 and for the year as a whole, we'll be lucky to see 2.5pc growth," said Niall Dunne, economist at Ulster Bank Financial Markets.
But Dunne does not expect the Fed to react to the drop in the PMI, the weaker than expected GDP and a slump in consumer confidence with a rate cut next week. //www.fxcentre.com