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We saw fairly uniform agreement in yesterday’s data that the pace of expansion in US manufacturing is accelerating, with the ISM manufacturing index hitting its highest level in two and a half years last month, concurring with a big rise in Markit’s manufacturing PMI, while a separate report showed construction spending increasing in October.
While manufacturing is not a huge component of the US economy, these PMI indices are very timely reports, pretty much the first out of the gate for November’s economic indicators, and historically have proven to closely match changes in GDP.
Such strong rises for November bode well, then, for the health of the overall economy in the final quarter of the year and metal traders would appear to be getting a little twitchy over what the Fed will make of this news, with the decision to reduce stimulus having been explicitly tied to incoming data by the FOMC.
Copper futures for March fell -0.5% to $3.1665 a pound deep in the New York trading session, after earlier hitting as low as $3.158, the lowest price in nearly two weeks. The US is the second largest consumer of copper, so a reduction in stimulus could well hamper demand for the metal.
Realistically, the Fed will be looking at a wider cross-section, with Wednesday’s ISM non-manufacturing and Friday’s employment data no doubt set to play a large part in their decision, but the data so far this week is ammunition piling up for the hawks at the Fed.