Carrick did warn however that there are a number of scenarios where the US economy could weaken and the Fed would need to delay further interest rate hikes.
“If a surge in commodity-related corporate defaults hampers the ability of ‘good firms’ to raise finance, then the US economy would be vulnerable,” he said. “Emerging country economic growth could also be weaker than we assume. A further slowdown in Chinese growth could easily push the global environment towards recessionary levels.”
He also noted that concerns over the corporate bond market might warrant a more cautious stance from Janet Yellen and company.
Away from Markit’s PMI, there was other weak data to weigh up.
“The slide in the Institute for Supply Management’s (ISM) non-manufacturing sentiment survey is a nasty surprise for those who remain convinced the US economy is firing on all cylinders and incapable of tipping back into recession,” said Russ Mould, investment director at AJ Bell.
“A reading of 53.5% for January represented a decline from 55.3% in December and comfortably undershot the consensus forecast of 55.1%. Bulls had argued that softness in the equivalent manufacturing survey would not matter, even though the reading here has sat below 50 for three months and reached six-year lows, asserting that consumer spending and leisure activity would take up the slack regardless,” Mould said.
“Yet a study of the long-term history of the two ISM surveys shows that once manufacturing starts to swoon, non-manufacturing always follows in the end. “This will only add to concerns the US Federal Reserve made a mistake by raising rates in December and that the American economy is losing momentum – and fast,” he added.
