The week ahead: scheduled data to keep an eye on - Nomura


Analysts at Nomura highlighted the scheduled events for the major FX space.

Key Quotes:

"United States | Data preview

Upcoming data will likely indicate elevated business sentiment but muted productivity growth.

"Factory orders (Monday): The Census Bureau’s advance estimates suggest that new orders for durable goods excluding transportation equipment increased at a solid pace (0.9% m-o-m) in April, consistent with our view that Q2 momentum is picking up. Orders and shipments of nondefense capital goods excluding aircraft also rose robustly, suggesting that business spending on equipment remains firm despite recent concerns over US trade policy. However, as trade uncertainty lingers, risk remains that businesses will respond negatively to a material escalation in trade tensions."

"ISM non-manufacturing index (Tuesday): Incoming business surveys for May suggest elevated sentiment although some cooling of forward-looking indicators implies businesses are still grappling with trade policy uncertainty. Consistent with the continued optimism, we expect the ISM non-manufacturing index to rise to 58.0 in May, from 56.8 in April. Measures of input prices will be of interest as the Empire State and Philly Fed surveys point to continued upward pressure. The Fed Beige Book for the June FOMC meeting also provided anecdotal evidence on broad-based increases in input prices."

"JOLTS (Tuesday): Job openings jumped by 472k to 6.55mn in March, the highest reading on record. This raised the job openings rate 0.3pp to 4.2%. Hires and separations were essentially unchanged. The ratio of the unemployed to job openings fell to a historical low of 1.0% and highlights a tighter job market. As the labor market remains healthy, we continue to expect healthy job openings while layoffs remain low."

"Productivity, Q1 final (Wednesday): According to BLS’ advance estimate, nonfarm productivity (real output per hour) increased 0.7% q-o-q saar in Q1 2018, while Q4 2017 was revised up to +0.3%, from 0.0% previously. On a 12-month basis, productivity rose 1.3% in Q1, a low reading by historical standards.  The final report should reflect some revisions to productivity and unit labor cost estimates based on incoming data."

"Trade balance (Wednesday): The advance estimate of the goods trade balance for April was $68.2bn, down $0.4bn from $68.6bn in March. Goods exports declined slightly after a strong increase in March. Although we had expected goods imports to rebound after an unexpected decline in March, goods imports fell $1.1bn (down 0.5% m-o-m) from the March estimate. On services, we expect service imports to stabilize after large fluctuations in previous months caused by payments related to 2018 Winter Olympic Games broadcasting rights. For service exports, we expect steady increases. Based on these estimates, our forecast for the April trade balance is a deficit of $47.6bn, a decline of $1.4bn from $49.0bn in the previous month. Note that the BEA’s annual revision to international trade data will be released with the upcoming report."

"Initial jobless claims (Thursday): As the labor market remains healthy, we continue to expect low readings in jobless claims. The recent volatility will likely subside as much of it was likely driven by imperfect seasonal adjustment around holidays."

"Consumer credit (Thursday): Consumer credit expansion has slowed somewhat recently to a 3.6% saar in March, the slowest gain since September 2017. The recent weakness was likely driven by slower expansion of revolving credit (mostly credit card loans). The softening appears consistent with relatively soft personal spending in Q1. Further, slower credit card loan expansion may have been a reflection of tighter lending standards. The Federal Reserve’s Senior Loan Officer Opinion Survey indicated that lending conditions on consumer credit card loans tightened modestly and demand for credit card loan softened in Q2. However, considering the strong pace of job gains and low unemployment, we do not think the recent slowdown signals a material deterioration in the consumer sector."

"Wholesale inventories (Friday): According to the advance estimate by the Census Bureau, wholesale inventories remained flat in April as the decline in nondurable goods offset the gain in durable goods. Given the continued growth in sales and downtrend in the inventory-to-sales ratio, we expect the flat reading in April to be transitory."

Euro area | Data preview

"Germany's industrial production and UK services PMI data will be in focus next week."

"UK BRC retail sales survey, May (Tues 5 Jun): The 4.2% annual decline in April’s likefor-like sales looked to be largely the result of the timing of Easter (earlier this year compared with last). The big question now relates to how sizable the rebound proves to be, which will aid our interpretation of how temporary or permanent the recent economic slowdown is turning out to be.

UK PMI services, May (Tues 5 Jun): In publishing the UK Perspectives yesterday (Thursday 31 May) we forecast the services index without having seen the results of the manufacturing PMI survey due today.  A reading of 53.5 (a rise of 0.7 points) for the services survey would be around its average over the past six months.

Germany industrial production, April (Tues 8 Jun): Germany’s April manufacturing PMI showed a robust increase in orders and suggested strong growth in intermediate goods, investment and consumers goods production. This is one of the factors, together with improving weather that lead us to expect that German industrial production in April rose by 0.3% m-o-m compared with March."

Japan | Data preview

"We forecast sentiment at the grassroots level to have weakened in May, in view of many indicators that show activity slowed.

April Family Income and Expenditure Survey, real household consumption expenditure (households with two or more members) (Tuesday): We forecast April real household consumption expenditure (per household) to rise 1.5% y-o-y, 0.8% m-o-m. Looking at household consumption-related statistics released thus far, new passenger car sales volumes rose 6.5% m-o-m and department store sales increased 2.2% m-o-m, indicating that personal consumption was strong in April (seasonal adjustments by Nomura). In the April Economy Watchers Survey, the household activity-related current conditions DI fell 0.4 percentage points (pp) month-on-month and the Consumer Confidence Index fell 0.7pp, indicating weakness in sentiment. In monthly sales statements, major department stores said sales of clothing were strong owing to rising temperatures. Growth indicated by sales data was strong, but clothing and auto purchases account for only a small percentage of personal consumption, and sentiment indexes were weak. We thus forecast growth in consumption expenditure as measured by the FIES to be weaker than growth in the noted sales statistics.

May Economy Watchers Survey - current conditions DI (Friday): We believe sentiment, as measured by economy watchers (workers, business operators, employees with a view of the economy) deteriorated slightly from April. Among related indicators, the sales DI for May in the Japan Finance Corp (JFC) Monthly Survey on SME trends rose from April, but only slightly. The manufacturing PMI fell from April and the survey of manufacturers' production forecasts points to a decline from April. The Economy Watchers Survey was carried out from 25 May to 31 May, at a time when moves to avoid risk in financial markets picked up owing to political concerns in Italy. We expect sentiment as measured in the Economy Watchers Survey to have weakened.

Asia | Data preview

"We expect the RBI to refrain from hiking rates but it is a close call. A further surge in Philippine inflation will justify more rate hikes. China’s export growth should moderate.

China: We expect export growth to moderate in May on RMB appreciation over the past year and the slowdown in Europe and Japan, China’s second- and third-largest markets. Import growth is likely to slow, but at a moderate pace, as China may start increasing its imports, especially of agricultural and energy products, from the US. Notably, the already announced tariff reduction on automobile imports will come into effect on 1 July, which may trigger some postponement of import orders and thus constitutes a downside risk to our export growth forecast. CPI inflation is likely to rebound as high-frequency data suggest some pick-up in food price inflation. We expect a continued rise in PPI inflation, partly due to a low base last year and in line with the improvement of price-related subindices in the official manufacturing PMI. Our FX strategists believe China’s headline FX reserves will fall by USD15bn to USD3109.9bn in May. After adjusting for FX and coupon effects, we estimate the adjusted change to rise by USD8.2bn, from USD2.1bn in April.

Australia: We expect a solid 1.0% q-o-q rise in Q1 GDP, bouncing back from 0.4% in Q4 2017. This reflects a solid contribution from net exports, led by higher resource export volumes, which were held up in Q4 by weather and an industrial dispute. We also see a below-average 0.4% q-o-q rise in private consumption, based on softer retail sales data, a solid rise in business investment and another increase in government spending. Partial data early next week, including company profits, net exports and government spending could cause consensus and our expectations to shift early next week."

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