US: Jobless claims, construction spending and vehicle sales in focus – Nomura

The analysis team at Nomura suggests that the release of initial jobless claims, construction spending and vehicle sales will be in focus for the forthcoming US session which are likely to engage maximum investors attention.

Key Quotes

“Initial jobless claims: Initial unemployment claims have been within a low range for a while. For the week ending 20 May, the four-week moving average of initial jobless claims fell to 235k, the lowest level since April 1973. Adjusting for the relative size of the labor force today, the four-week moving average of initial claims as a share of payroll employment is at its lowest level observed. As the labor market tightens further, we expect initial claims to stay low.”

“Construction spending: In Q1, construction expenditures contributed solidly to real GDP growth, partly boosted by unusually warm weather in January and February. The latest report indicates that total construction spending declined slightly by 0.2% m-o-m in March as warmer weather returns to normal, but the contribution to GDP growth was still substantial. Moreover, notable upward revisions to January and February construction outlays appear consistent with strong increases in private structures and residential investment in Q1. In April, consensus expects a decent 0.5% increase in total construction outlays. Firm consumer demand for housing and a low inventory of existing homes on the market may support residential construction in coming months. However, a recent tightening in lending standards of commercial real estate loans, as indicated by the latest Senior Loan Officer Survey by the Fed, may slow nonresidential construction outlays to some degree.”

“Vehicle sales: In April, total light vehicle sales rebounded to an annual rate of 16.81mn units after posting the weakest sales since February 2015 in the prior month. Despite a moderate rebound, the sales in April were still short of the 2016 average pace of 17.46mn. In May, we expect only a slight acceleration to 16.90mn units (Consensus: 16.90mn). Sales boosted by aggressive incentives peaked in December at 18.32mn units. With an already-high level of incentive spending, automakers have been struggling to maintain the current pace of sales since earlier this year. Moreover, as sales have slowed, the inventory-to-sales ratio picked up sharply in recent months and exerted additional pressure on automakers. On the demand side, despite gradually rising personal income, tightening auto loan standards are likely to have a lasting adverse impact on consumer demand. In recent years, auto sales have been partly boosted by increased access to easy credit with lax lending standards as competition among auto lenders has intensified. A recent trend of tightening, initiated in part by rising delinquency rates, may continue to dampen consumer demand.”