Key US data on the cards - Nomura

Analysts at Nomura offered their previews for the key US data for the forthcoming sesison.

Key Quotes:

"Q1 GDP, second estimate: In the advance estimate, the BEA reported that real GDP grew by 0.7% q-o-q in Q1 at a seasonally adjusted annualized pace, slowing from 2.1% in Q4 2016. Personal consumption was noticeably soft, increasing 0.3% compared to 3.5% annual pace in Q4. While the weakness in consumer spending was broad-based, warmer-than-usual weather and a delay in tax refunds likely contributed to some drag. Moreover, inventory investment also added a significant drag after a strong increase in Q4. However, nonresidential investment increased markedly by 9.4%, partially led by a strong increase in structures investment (22.1%) and equipment investment (9.1%). Further, much of the increase in structures investment was attributable to a significant jump in mining exploration, shafts and wells.

Recent data since the advance estimate suggest a possible downward revision of the BEA’s second estimate. Annual revisions to manufacturers’ shipments, inventories and orders as well as revisions in retail sales, both coming in positive, were likely counteracted by downward revisions in wholesalers’ and retailers’ inventories in March, resulting in a net drag from weaker inventory investment. Altogether, we expect headline Q1 GDP growth to be revised down to 0.6% from 0.7% in the second estimate (Consensus: 0.9%). 

Durable goods orders: We expect a modest decline of 0.2% m-o-m in total durable goods orders in April (Consensus: -1.5%) after a four-month stretch of monthly increases since December 2016. A primary factor of the expected decline is orders for volatile transportation equipment. Nondefense aircraft orders dropped sharply, which may translate into a double-digit decline in non-defense aircraft orders. While motor vehicle and parts orders likely increased slightly given increased vehicle sales and assemblies, federal government spending on the Air Force points to some decline in orders for defense aircrafts and parts. Overall, we forecast a 1.3% decrease in transportation equipment orders. That said, excluding transportation equipment, we expect durable goods orders to continue to increase moderately in April and forecast an increase of 0.4% (Consensus: 0.4%). Industrial production for ex-trans durable goods rose in April and ISM manufacturing survey’s new orders index inched down but remained elevated. We think that manufacturing activity continued to recover partly because of increased oil and gas well drillings activity and increasing international trade globally, although manufacturers’ sentiment fluctuated recently due to changes in expectations for fiscal policy. University of 

Michigan consumer sentiment: April’s preliminary reading from the University of Michigan indicated a slight uptick in consumer sentiment, from 96.9 in March to 98.0. There remains a deep partisan divide within the survey as Democrats and Republicans continue to view future economic conditions in diametrically opposed ways. With continued political partisanship, it is possible that lingering policy uncertainty, or even potential policy disappointments, would affect consumer sentiment materially. Consensus expects 97.5 for the final estimate for May. Median 1-year and 5-10 year ahead inflation expectations remained unchanged at 2.5% and 2.4%, respectively, in the preliminary reading. While 1-year ahead inflation expectations have decreased across the distribution of respondents (with similar decreases seen in the 25th and 75th percentiles), 5-10 year ahead inflation expectations for the 75th percentile have decreased much more substantially compared to the median and 25th percentile, indicating some tightening in the distribution."