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US PMI Slightly Lower

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The US data picture continues to show mixed signals. Just published is the dated Redbook Indices for 21st March, the month on month figure is running at -0.5% verses last weeks -0.4% and the year on year number is 2.3% which can be compared with the previous reading of 3.1%. The Redbook numbers are near surrogates for the Retail Price Index figures and as such provide a real time view of the US inflationary situation due to their frequency of publication.

Additionally from the US we have just had the release of the March Manufacturing Purchasing Managers Index (PMI). This number of 55.5 a slight fall off from February’s figure of 57.1.

Fed chair, Janet Yellen, took the opportunity yesterday to begin the process of rowing back on a recent commitment to raise US interest rates within 6 months following the end of the bond buy back program. She initially made this commitment after the FOMC meeting two weeks ago but it now appears that she is adding some further clarification to these comments.

Yellen didn’t directly correct or contradict her statement, instead she noted that the in light of the structural difficulties in the US unemployment situation the Fed would be inclined to remain ‘accommodative’ for as long as possible.

The FOMC had agreed to de-couple monetary policy decisions from the unemployment rate. In normal circumstances the Fed would have begun monetary tightening in response to unemployment falling below the key threshold of 6.5%, a level the US is gradually approaching. The reference by the Fed chair yesterday to the structure of employment is being taken to mean that the Fed is growing concerned with the rise of part-time employment in the US economy. Part-time jobs displace full-time jobs but yet still show up as full-time jobs in the unemployment statistics. Really what Yellen was saying yesterday is that there is now a new metric influencing the FOMC decisions, this is the ratio of part-time to full-time workers.

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