Thursday, 25 October 2012

Fed policy unchanged as US new homes sales jump

The Federal Reserve made no change to monetary policy on Wednesday. It noted that the economy is still growing modestly and unemployment remains elevated.

Housing in the US, meanwhile, continues to recover. A report on Wednesday showed that new home sales rose 5.7 percent to a 389,000 annual pace, the highest since April 2010.

There was also good news for US manufacturing on Wednesday. A preliminary reading from Markit showed that its US manufacturing PMI rose to 51.3 in October from 51.1 in September.

Manufacturing in China also showed signs of improvement. A preliminary report from HSBC on Wednesday showed that its China manufacturing PMI rose to 49.1 this month, the highest level in three months, from 47.9 in September.

However, there was no relief for the euro area. Markit's composite index for the euro area fell to 45.8 in October, the lowest in more than three years, from 46.1 in September. The manufacturing index fell to 45.3 from 46.1 while the services index edged up to 46.2 from 46.1.

Germany was also hit, its manufacturing index falling to 45.7 in October from 47.4 in September and its service index falling to 49.3 from 49.7.

Further evidence of deterioration in Germany's economy came from the Ifo institute, who reported on Wednesday that its business climate index fell to 100.0 in October from 101.4 in September.

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