US: Q1 GDP, consumer sentiment, Chicago PMI and employment cost index data due - Nomura

The research team at Nomura suggests that the release of Q1 GDP, consumer sentiment, Chicago PMI and employment cost index data in the upcoming US session will keep investors engaged today.

Key Quotes

“Q1 GDP, first estimate: With spending data pointing to decelerating economic growth, we expect the BEA to report that Q1 GDP growth slowed to 0.2% q-o-q saar (Consensus: 1.0%) from 2.1% in Q4. Based on data that came out this week, our Q1 estimate was lowered by 0.8pp from our previous forecast of 1.0%. Although several special factors cloud the Q1 picture and increase the uncertainty surrounding our Q1 forecast the weakness cannot be entirely dismissed.”

“Employment cost index, Q1: Wage growth during Q1 2017 slowed somewhat compared to previous quarters on a y-o-y basis. Average hourly earnings growth for production and nonsupervisory workers slowed slightly to 2.4% y-o-y in Q1 from 2.5% in Q4. By contrast, labor markets remain tight as payrolls have increased by an average of 178k during Q1 2017 and the ratio of vacancies to unemployed workers has increased over the past few quarters. We expect the wages and salaries index of the ECI report to have increased 0.5% q-o-q in Q1, resulting in a 2.1% y-o-y increase. This pace is slightly below the average for 2016 but in line with recent trends in average hourly earnings. Our expectation for ECI total compensation (of which 70% comes from wages and salaries) is a 0.5% q-o-q increase (Consensus: 0.6%), which translates to 2.1% y-o-y.”

“Chicago PMI: This index reached 57.7 in March, a slight increase from 57.4 in February, suggesting that manufacturers’ optimism continued. In April, however, other regional manufacturing surveys showed sharp moderation in sentiment. Both the Empire State manufacturing survey and the Philly Fed survey posted a notable decline. Although still at high readings, the latest prints of these surveys suggest there may be some pullback in business sentiment which has surged strongly since the election despite a lack of notable improvement in spending. It is also possible that continued policy uncertainty has adversely affected business sentiment. Altogether, we forecast that the Chicago PMI inched down to 56.0 in April, slightly lower than the elevated reading in March (Consensus: 56.2).”

“University of Michigan consumer sentiment: April’s preliminary reading from the University of Michigan indicated a slight uptick in consumer sentiment, from 96.9 in March to 98.0. There remains a deep partisan divide within the survey as Democrats and Republicans continue to view future economic conditions in diametrically opposed ways. With continued political partisanship, it is possible that lingering policy uncertainty, or even potential policy disappointments, would affect consumer sentiment materially. Consensus expects the final reading to be unchanged from 98.0.

Median 1-year and 5-10 year ahead inflation expectations remained unchanged at 2.5% and 2.4%, respectively in the preliminary reading. While 1-year ahead inflation expectations have decreased across the distribution of respondents (with similar decreases seen in the 25th and 75th percentiles), 5-10 year ahead inflation expectations for the 75th percentile have decreased much more substantially compared to the median and 25th percentile, indicating some tightening in the distribution.”