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Will the Fed will pull the trigger at its next meeting?

The alignment of Purchasing Manager Indices (PMI) indicates serious global slowdown

Broad view: This is the very first time in several quarters where nearly all

the key global PMIs are simultaneously pointing toward a sharp slowdown.

While data for the Eurozone continued to spiral down in the recessionary

environment, the data for the US also suggested an economic contraction.

This makes the global economic strain even more worrisome.

With global economies (US included) losing significant momentum, it is very likely that

the Fed will pull the trigger (non-traditionally policy) at its next meeting

(July 30-August 1).

Recent research on the question.

For readability ... over 4 posts.

Taken from here

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Data points toward global economic contraction:

This is the second time in three years that Global Manufacturing data has fallen below the contraction line. Note that the Global PMI fell to 48.9 in June.

The weakness appears to be broader based as the data indicated a sharp slowdown in the US and the Eurozone, as well as key economies in Asia (China, Japan, South Korea and Taiwan).

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Another deep dip for Eurozone:

The Purchasing Manager Index (PMI) for the Eurozone fell for the eleventh month in a row to 45.1. The data also suggested a severe contraction in new orders and production, which led to steep job losses.

Except for Ireland and the Netherlands, all of the Eurozone economies posted slower manufacturing activities.

The prime concern is that the manufacturing data for Germany made its steepest drop in three years (4th monthly decline in a row).

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US finally fell into contraction territory in June:

The economic conditions at the global level are becoming even more stressful as the manufacturing cycles in the US have started to shrink.

The US ISM index dropped to 49.7 (June) from 53.5 registered in the previous month.

Nearly all the components in the ISM Index made their way down this month, with the weakest being New Orders, Production and Prices. Maybe the data might be starting to reflect the so-called “fiscal cliff”.

Note that most of the government’s programs will expire by the end of this

year or the beginning of 2013 (under the current law). This implies a sharp

slowdown of government spending related businesses.

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