US: Important week for economic data - Nomura

Analysts at Nomura suggest that this week will be important for the US economic data with August CPI, retail sales and industrial production releases.

Key Quotes

“We expect a solid 0.3% (0.256%) m-o-m increase in core CPI, equivalent to 2.4% on a 12-month basis. In addition, we expect incoming retail sales and industrial production data to remain consistent with an economy growing at roughly 3%.”

“Data last week remains consistent with steady momentum in the economy driven by strong domestic demand despite trade uncertainties. Nonfarm payroll employment increased strongly by 201k in August as the unemployment rate held steady at 3.9%. Average hourly earnings (AHE) growth surprised to the upside with a strong 0.4% m-o-m gain and raised the y-o-y rate to 2.9%. While we expect only gradual pickup in wage growth, sustained solid gains in AHE should add support for the FOMC’s expectations for further gradual rate increases.”

“However, manufacturing employment declined unexpectedly with broad-based weakness, in contrast to a stronger-than-expected August ISM manufacturing survey report. Incoming manufacturing survey employment indices have been positive. In addition, new orders and output indices generally remained firm, pointing to continued expansion in business activity.”

“It will take more data points to gauge any impact of trade policy on the manufacturing sector. For the time being, solid underlying momentum in aggregate demand appears to outweigh uncertainty on US trade policy. In addition, non-manufacturer sentiment surprised to the upside in August with the ISM nonmanufacturing index increasing 2.8pp to 58.5, pointing to strong activity.”

“Taken altogether, economic developments last week remain consistent with firm underlying momentum in an economy benefiting from substantial fiscal stimulus.”