US data review / GDP tracking update - Nomura

Analysts at Nomura noted the day's data from the US and offered their review / GDP tracking update while we await the US CPI and retail sales up next. 

Key Quotes:

"NFIB small business survey: According to the NFIB, small business optimism increased marginally in October, up 0.8pp to 103.8. Those reporting that now is a good time to expand and those expecting higher real sales in six months both increased 6pp, indicating a healthy outlook over the near to medium term. Moreover, the net percentage of small businesses planning to raise worker compensation over the next three months increased 3pp to 21%, the highest level since December 2015. However, the percentage planning capital expenditures over the next 3-6 months remained unchanged at 27%, 5pp below the recent peak of 32%. Overall, small businesses remain upbeat about the economic outlook.

PPI: PPI increased by 0.4% m-o-m in October, exceeding the market expectation of +0.1%. Although energy prices were flat, food prices rose strongly by 0.5% m-o-m and trade prices which represent margins of retailers and wholesalers jumped by 1.1% m-om. However, stripping out those volatile components, core PPI which excludes food, energy and trade prices continued to increase only moderately by 0.2% m-o-m, suggesting that the underlying pace of inflation hasn't changed. As for implications to CPI, finished consumer food prices, a proxy of food-at-home prices, rose steadily by 0.6% m-o-m, broadly in line with our expectation. On the other hand, a 0.2% increase in residential electricity prices came in slightly below our forecast. While the details of PPI suggest only a small downside risk, we are comfortable with our current forecast for the October CPI. 

GDP tracking update: Relevant inventory deflators from today’s PPI data were stronger than our expectations, implying less real inventory investment in Q4. Thus, we lowered our Q4 GDP tracking estimate 0.2pp to 2.3% q-o-q saar."