US Fed likely to pay more attention to November ISM non-manufacturing index

US ISM manufacturing Index dropped to 48.6 in November from that of the previous month's 50.1, also lower from the market consensus expectations of 50.5, lowest level since June 2009.

Last year, the manufacturing alone accounted for near 14% of gross value addition to US while services and construction added nearly 82%. Services employment accounted for over 86%, total non farm payrolls for 9%.

Market now focuses on Thursday's non-manufacturing ISM Index in November and November's Jobs report. Given that both are very weak, it would be hard for US Fed to justify a raise in interest rate in December.

"We expect a small decline in ISM non-manufacturing to 58.0 in November from 59.1 in October (consensus: 58.0) and that  payrolls increased by 175,000 in November (consensus: 200,000)", estimates Danske Bank. 

This should be sufficient for the central bank to comfortably raise rates at its December meeting, in spite of having very weak ISM manufacturing Index. This low ISM manufacturing would definitely be a concern for FOMC members.