The latest US economic growth estimate from the Fed suggests that activity is rising at a healthy 3.5% annualised clip, according to Jamieson who also noted that it is encouraging that the estimate incorporates the disappointing US manufacturing sentiment that came out last week.
The Institute for Supply Management (ISM) measure for August showed that economic activity in the manufacturing sector contracted following five consecutive months of expansion, suggesting a modest slowdown.
The next Federal Open Market Committee meeting on 21 September will therefore have the general backdrop of economic data coming in “a little softer than the forecasts”, in Jamieson’s view.
“Perhaps importantly China is one of the few exceptions with their version of the ISM continuing to creep higher and suggesting expansion – an apparently better Chinese economy should at least keep emerging markets calm and better placed to absorb a tightening in the US policy rate if it comes,” he said.
With the election looming Yellen will not want to be blamed for upsetting financial markets, according to Jamieson. “On balance Yellen should have the platform for lifting the US policy rate; the question is, does she feel that she can get away with it?”
Turning to the United Kingdom, Jamieson noted it has seen the strongest ‘beat’ on forecasts in recent weeks, with last week’s industrial PMIs come in much stronger than expected.
And although the change is more impressive than the absolute levels, with UK forecasts now perhaps normalised after the Brexit spasm it will be interesting to watch how things evolve, Jamieson noted.
