ISM Manufacturing Index (May, Tuesday 10:00 ET)
Forecast: 59.9 Consensus: 58.9 Previous: 60.4
May’s regional manufacturing indices have indicated that manufacturing activity will remain strong, but the pace of expansion could slow slightly. As a result, the ISM may fall back to 59.9 from 60.4, but the level will still remain above the historical average of 52.0. This result would be a good sign that non-residential investment in equipment and software will firm in 2Q10 and that the manufacturing industry will be a source of job growth.
Motor Vehicle Sales (May, Tuesday, time n.a.)
Forecast: 11.4M Consensus: 11.4M Previous: 11.2M
May means Memorial Day sales for auto buyers. As a result, we anticipate that the end of the month discounts will help to push auto sales up to 11.4M from 11.2M in April. Nevertheless, even apart from the demand generated by this month’s discounts, auto demand has been slowly improving since the end of the Cash for Clunkers program. The significance of an improvement in May’s sales would be two-fold. First, it would imply that demand for big ticket items is improving and, second, it would indicate that motor vehicle and parts manufacturing could remain sturdy.
Pending Home Sales (April, Wednesday 10:00 ET)
Forecast: 2.7% Consensus: 4.4% Previous: 5.3%
The tax credit for home buyers is expected to boost pending home sales for one last month in April as potential buyers rush to sign the sales contract before the April 30th expiration date. Unlike the original tax credit, buyers only have to sign a binding sales contract by the expiration date, but have up to June 30th to finalize the purchase. As a result, the benefit to existing home sales could continue into May. While we do anticipate that home sales could adjust down after the end of the tax credit, low prices and favorable mortgage rates will continue to attract buyers to the market.
Non-Farm Payrolls and Unemployment Rate (May, Friday 8:30 ET)
Forecast: 375K, 9.9% Consensus: 500K, 9.8% Previous: 290K, 9.9%
The labor market is expected to gain momentum in May as job creation accelerates for the fifth consecutive month. May payrolls will benefit from Census hiring, but the primary driver of job growth will be the private sector. Nevertheless, the unemployment rate is expected to remain high at 9.9% due to an influx of new labor market participants as formerly discouraged workers resume their job search. Consumers have been reacting well to the payroll data. Another positive month will support consumer confidence and, in turn, consumer spending. This result would support our expectation that consumption will support GDP growth in 2Q10.
