US manufacturing contracts for the first time since 2012 - has it just scuppered Janet Yellen's plans for an interest rate hike?

Emma Haslett
Follow Emma
Janet Yellen Holds News Conference On Fed Interest Rate Decision
"Ruh-roh..." (Source: Getty)

Unnerving times for Fed-watchers, after figures published today showed US manufacturing contracted in November for the first time since 2012.

The Institute for Supply Management's New Orders Index registered a score of 48.9 per cent in November, four percentage points lower than November's 52.9 per cent - and its weakest since June 2009.

For those nervously awaiting an interest rate hike by the Federal Reserve, mooted for later this month, it's a worry.

Unusually strong economic data coming out of the US in recent weeks has bolstered expectations of the FOMC electing to raise rates - so what does this mean?

"Overall, the report is likely to make some Fed voters wary about hiking rates later this month," said James Knightley, senior global economist at Ing.

But he suggested Fed chief Janet Yellen will be undeterred.

"The services sector dwarfs manufacturing and is performing well while the economy is creating jobs, wages are starting to rise and core inflation pressures are building.

"As last year's drop in energy prices fall out of the annual comparison, headline inflation should swiftly start to rise. We think there is enough to convince a majority of voters to opt for a hike, particularly if Friday's jobs report posts respectable gains, as we expect."

Related articles