US: ISM manufacturing and jobless claims amongst economic releases - Nomura

Research Team at Nomura, lists down the key economic releases from the US session for the day.

Key Quotes

“Initial jobless claims: Initial jobless claims have hovered in the 260–270k range for the past 5 weeks, a good sign that involuntary layoffs remain quite low in the US labor market. This weekly measure could give an early warning sign of any deterioration in the labor market.

Productivity Q2, preliminary: Nonfarm productivity declined by an annualized rate of 0.5% q-o-q in the preliminary estimate for Q2, marking the third consecutive quarter of productivity declines. There are few signs that it will pick up any time soon as job growth has reaccelerated and output continues to expand at a pedestrian pace. The FOMC participants cited structural factors such as the weak trend in productivity growth as one of the factors holding down the neutral rate of interest below historical norms. With Q2 GDP likely to be little changed and hours growing at a steady pace, the final estimate of Q2 productivity should be comparable to the preliminary estimate. As such, consensus forecasts no revision to the preliminary estimate of -0.5% q-o-q in Q2.

Unit labor costs, Q2, preliminary: Unit labor costs grew at an annualized rate of 2.0% q-o-q in the preliminary estimate for Q2 as compensation grew at a steady pace of 1.5% q-o-q while productivity declined by -0.5%. Consensus expects the final estimate to show little change from the first estimate and forecasts a 2.0% increase in unit labor costs in Q2.

Construction spending: Construction activity stalled in Q2 as construction spending declined in all three months in the quarter. Residential construction activity appears to have stabilized in recent months after a sharp slowdown in April. In fact, housing starts have been growing at an elevated pace since May. But nonresidential construction activity has been sluggish and there’s no real sign of a strong pickup. In this context, most construction activity will likely come from the residential sector. Consensus expects a modest 0.5% m-o-m increase in July.

ISM manufacturing: The headline index declined to 52.6 in July from 53.2 in June. Although the headline number missed the mark, the production and new orders indexes remained steady at elevated levels, suggesting that the pickup in activity at the end of Q2 carried over into Q3. Early read on the manufacturing sector from regional Fed surveys in August show mixed performance but financial conditions have been broadly favorable for better business spending. We believe that manufacturing activity expanded again in June but at a slower pace and forecast that the ISM manufacturing index declined to 52.0 in August.

Vehicle sales: Total vehicle sales rebounded strongly in July, coming in at 17.78mn SAAR following a disappointing sales pace of 16.61mn SAAR in June. According to WardsAuto, the 4th of July weekend “gave the month a strong start and the momentum continued through the end.” In August, we expect some mean reversion to previous trend and forecast a modest stepdown in vehicle sales to 17.4mn SAAR.”