Key Events in the U.S. - Nomura
Analysts at Nomura offered a preview of U.S. data events.
In line with our forecast for BLS private nonfarm payrolls, we forecast that ADP private employment gained an additional 200k jobs in April (Consensus: 195k).
Productivity Q1, preliminary:
Nonfarm productivity growth has been sluggish, with growth in hours worked outpacing output. Given that GDP grew at a slower pace in Q1 and growth in hours worked from the employment report grew a bit faster in Q1 than it did in Q4, Consensus forecasts a 1.3% q-o-q decline in Q1 productivity growth. The continued slow pace of productivity growth suggests that the current pace of job creation without stronger economic growth is unlikely to be sustainable. We continue to expect only a gradual increase in productivity over the next several years.
Unit labor costs Q1, preliminary:
With wage growth now at the forefront of the discussion of monetary policy and inflation, unit labor costs could provide a good indication of underlying inflationary pressures. Slower Q1 productivity growth will likely prop up unit labor costs in Q1. As such, Consensus forecasts that unit labor costs increased by 3.3% in Q1.
The advance report on international trade in goods showed that the goods trade deficit narrowed in March. Based on the advance report, both goods imports and goods exports decreased, but the fall in imports had a much larger impact on the deficit than the drop in exports. Taking the advance report on trade in goods into account, we forecast that the trade balance narrowed significantly to -$40.0bn in March (Consensus: -$41.1bn) from -$47.1bn in February. This full trade report will include key information such as a detailed breakdown of exports by destination and estimates for trade in services.
Factory orders have been shaky for the last year, as demand for manufactured goods has fallen off with global demand slowing, the stronger dollar, the slowdown in investment in the oil and gas sector, and domestic firms still working through high inventory levels. Total orders of durable goods posted a modest increase in March, due to defense transportation orders. This suggests that we should see some increase in factory orders in March. As such, Consensus forecasts that factory orders rose by 0.6% in March after declining by 1.8% in February.
This measure of activity in non-manufacturing increased in March after slowing to start the year. That said, the index has consistently remained above 50 and indicative of continued expansion in the non-manufacturing sector. We expect the non-manufacturing sector to continue to drive economic activity in the near term, as the industrial sector struggles to adjust in a challenging environment. As such, we expect the ISM headline non-manufacturing index to remain in expansion territory at 53.5 in April (Consensus: 54.8).