The FINANCIAL -- The housing market in US is in a strong uptrend but the manufacturing sector is
beginning to falter. This has fuelled uncertainty about the US economic
outlook, according to HSBC Group, including among members of the Federal Open Market Committee
(FOMC), which appears to be considering tapering or slowing the pace of
quantitative easing (QE), possibly towards the end of 2013.
When the FOMC launched the current QE3 programme of quantitative easing in September 2012, it said the expansion of its balance sheet would continue until the outlook for the labour market improved substantially.
Unexpected developments in the labour market may be influencing the thinking among FOMC members about the appropriate timing for adjustments in the QE programme. In particular, reported job gains for 2012 have been revised higher and this year’s gains have been generally stronger than expected, according to HSBC Group.
Recent gains in payroll employment have been close to the 1 per cent six-month gain HSBC Group has posted as a guiding criterion for QE this year. Tapering talk has emerged among Federal Reserve officials, who seem to be anticipating “real and sustainable” improvements in the labour market outlook that could allow them to start gradually scaling back the programme over the next several months.
HSBC Group expects GDP growth to slow from the first-quarter reading of 2.4 per cent. Group thinks job gains could falter and thus expect the FOMC to delay any cuts in the QE programme until December 2013.