Mecklai graph: Is QE4 on the cards?

Mecklai graph of the day: QE4 on the cards?

ISM manufacturing is a leading indicator of economic health. Businesses react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company's view of the economy.

U.S. manufacturers contracted in November and activity fell to the lowest level since July 2009, as new orders sank and employment plans were scaled back. As shown in the graph, the index has fallen in four of the last six months and in Nov fell to 49.5% from 51.7% in October. Markets interpreted the result through the prism of Fed stimulus expectations after most of the Federal Reserve officials advocated further stimulus in the form of additional buying of $45 billion of treasuries.

As we have a host of economic data releases this month, any signs of deterioration in the same will set the stage for next round of stimulus. Moreover, the fall out of operation twist program this month along with fiscal cliff concerns, threatening the road to recovery of the economy would warrant a shot in the arm to boost growth. The idea would be more of necessity rather than an option.

Below graph shows Institute of Supply Management’s manufacturing releases in the last 6 months.

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