US data previewed - Nomura

Analysts at Nomura offered a review of the US data from overnight.

Key Quotes:

"Review Advance goods trade balance: The Advance Economic Indicators Report by the Census Bureau for May reported a goods trade deficit of $65.9bn, narrower than expectations (Nomura: $67.3bn deficit, Consensus: $66.0bn deficit). Goods exports rebounded by 0.4% m-o-m in May after a disappointing 0.3% decline in April. The rebound in May was driven by a strong increase in autos and consumer goods exports, which jumped 4.8% and 6.0%, respectively. Imports declined 0.4%, contributing to a narrower trade gap in May. Regarding inventories, advance estimates indicate that retail and wholesale inventories increased 0.6% and 0.3% m-o-m in May, respectively, with modest upward revisions to the prior month. Modest increases in the advance estimates appear in line with our view that inventory accumulation, which remained subdued in Q1, would likely pick up and contribute positively to real GDP growth in Q2.

Pending home sales: Pending home sales fell 0.8% m-o-m in May, marking the third consecutive month of declines. The slump in the pending home sales index, a leading indicator of existing home sales, portends a possible slowdown in sales of previously owned homes in coming months. The National Association of Realtors (NAR) attributed this decline to the ongoing supply shortages that are propping up home prices in many metro areas despite solid buyer interest. Incoming data suggest both new and previously owned home prices have been on the rise. According to May data, the appreciation of new home prices outpaced that of existing homes. Although this development may encourage more first-time buyers to purchase existing homes, the lack of listings in the affordable price range on the existing home markets appears to have squeezed them out. In line with this view, the NAR reported “lopsided conditions in many areas where investors and repeat buyers with larger down payments are making up a bulk of the sales activity."

GDP tracking update: The better-than-expected trade balance in May is positive to Q2 GDP. While decent increases in retail and wholesale inventories are broadly in line with our expectations, a strong buildup of retailers' automotive goods inventories was partly offset by weak imports in May. Although pending home sales came in slightly weaker than expectations, implying less Q2 brokers’ commissions than we estimated, after rounding, it had no effect on our tracking number. However, the results from the trade balance and inventories resulted in an upward revision to our Q2 GDP tracking estimate by two-tenths of a percent to 2.8% from 2.6% previously."