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Westpac thinks the US needs more quantitative easing

Mixed economic growth readings for the second quarter in the US have given Elliot Clarke, an economist for Westpac (ASX: WBC), reason to believe that the US economy needs stimulus for longer, whilst the Federal Reserve’s intention to show down the pace of quantitative easing remains no closer to being justified, as reported by The Australian Financial Review.

Whilst some areas of the US economy are performing positively, the numbers are not consistent and are instead coming through in “bursts”, whereby the numbers estimated for both 2013 and 2014 are “a bit optimistic.”

For instance, Clarke believes that the turnaround in the jobs market can largely be attributed to people dropping out of the workforce, as opposed to the economy creating a bigger working class. He said “we have these bursts of employment growth, then they kind of fade away.”

According to the AFR, the monthly ADP jobs report showed a better than expected 200,000 hirings in the private sector in July. This was followed by a weaker than anticipated Chicago purchasing managers index report, highlighting the mixed readings from the US.

Whilst Clarke has stated that the Fed has more reason to increase the level of quantitative easing rather than reducing it, most traders are predicting that the tapering off of the bond buying program will begin in September.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

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