Key US data reviewed: Q2 GDP tracking estimate lowered - Nomura

Analysts at Nomura offered a review of the latest and key US data.

Key Quotes:

"Philly Fed Survey: The headline index rebounded strongly to 38.8 in May from 22.0 in April, above expectations (Nomura: 22.0, Consensus: 18.5). This rebound is a sharp contrast to the May Empire State survey headline index, which fell notably in the month below the elevated readings after the election. The sub-indexes of the Philly Fed survey remained high. The shipments index jumped 15.7pp to 39.1. The new orders index inched down 2pp to 25.4, which is still a highly elevated reading. Indicators of labor market conditions held up. The number of employees index decreased slightly by 2.6pp to 17.3, but the average workweek index rose 2.8pp to 21.7. Although strength in current indicators suggests continued growth in regional manufacturing activity, forward-looking indicators mostly decreased, suggesting diminished optimism. Notably, the six-month ahead general business activity index fell 10.6pp to 34.8. 

Initial jobless claims: For the week ending 13 May, initial claims decreased to 232k from 236k a week earlier. The four-week moving average, a less volatile series, decreased to 241k from 244k. Continuing claims fell 22k to 1898k during the week ending 6 May. Both initial and continuing claims remain at historical lows, with continuing claims at their lowest since 1973. In particular, continuing claims have dropped notably since the beginning of the year, with the four-week moving average decreasing to 1946k in early May from 2085k in early January. This downtrend appears consistent with an uptick in the rate of transition from unemployment to employment in the monthly employment survey and a downtick in the unemployment rate. Another downtick in today’s report highlights resilient improvement in labor markets. 

GDP tracking update: The Census Bureau released annual benchmark revisions to Manufacturers' Shipments, Inventories, and Orders (M3) data. Manufacturers’ inventories for January through March 2017 were revised upwards, suggesting less of a slowdown in the change in private inventories in Q1. Therefore, our Q1 GDP tracking estimate has been raised by 0.1pp to 0.8% from 0.7%. Moreover, the upward revision to Q1 inventory accumulation created a higher jumping-off point for Q2. This implies a smaller increase in inventory accumulation in Q2 from Q1. Thus, our Q2 GDP tracking estimate has been lowered by 0.1pp to 3.5% from 3.6%."