In addition, China’s Purchasing Managers Index (PMI) declined to 50.5 in January, down from 51.0 in December, suggesting that its economy may be stagnating. Note: A PMI drop below 50 suggests economic contraction.
In the U.S., the Department of Commerce reported that the economy grew at an annual rate of 3.2% during the fourth quarter of 2013, driven by consumer spending, and the Federal Reserve reported that it would continue to reduce its stimulus efforts.
- Regarding global equity markets – There are increased concerns that economic stress in countries such as Argentina, South Africa, Turkey and the Ukraine), along with China’s PMI results will negatively impact on other regions as well.
- Regarding the U.S. economy – The positive economic results are helpful, and while the Federal Reserve’s reduction in stimulus may suggest increased confidence in the U.S. economy, it is likely that its stimulus efforts have reached the point of diminishing returns.
- Note: When the U.S. Department of Labor announced that December’s employment trends were significantly lower than expected, economists suggested that unusual winter weather was a contributing factor. This Friday, January’s results will be released; there will be significant attention on determining if December was an anomaly or the start of a trend.