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22 Apr 2016
U.S. data reviewed - Nomura
Analysts at Nomura offered a review of the U.S. data overnight.
Key Quotes:
"The Philly Fed manufacturing index declined to -1.6 in April from 12.4 in March. The ISM-adjusted index, which takes into account the subcomponent of the report, also declined sharply to 43.1 from 51.7. Today’s report runs counter to the Empire State manufacturing survey for April, released last Friday, which improved further in April. The measures of current activity reversed all the gains from March. The new orders subindex fell to 0 after increasing to 15.7 in March while the shipments subindex cratered, declining over 30 points to -10.8 in April.
Other indicators, such as the unfilled orders, delivery time and, inventories subindexes, either reentered or fell further into negative territory. The employment subindexes—the number of employees and the average workweek subindexes—were quite weak, both falling over double digits to -18.5 and -16.2, respectively.
It appears that the jump sentiment in March could have been a false signal fueled by the rally in equity prices and a pickup in commodity prices. We saw this optimism reflected in other regional and national manufacturing surveys for March, while GDP-relevant data, such as industrial production and durable goods shipments, continued to indicate that activity in the industrial sector was still weak. The one bright note of the report came from the six-month-ahead section, which was somewhat more optimistic in April compared with March.
The headline index increased to 42.2 from 28.8, while expectations for new orders, shipments, and hiring picked up. The general optimism is a good sign that industrial activity may stabilize in coming quarters. So, although industrial activity will likely continue to be weak in the near term, it appears that more firms still expect to see a rebound by the end of the year. We will see how other manufacturing reports, such as the Chicago PMI and the national ISM manufacturing reports, for April perform in coming weeks. Initial jobless claims were 247k (Consensus: 265k) in the week of April 16, marking the lowest level since 24 November 1973. Although the continued decline is positive, some calendar factors associated with Good Friday/Easter might have played a role behind the drop in the week. Moreover, the lower-than-expected initial claims might have been related with a decline in the take-up rate or the share of those eligible actually claiming unemployment benefits. Another possibility is that the improvement in initial claims might be a reflection of low job turnovers. Thus, we think that some of the recent decrease in initial claims is not attributable to changes in the underlying trend of labor markets.
Continuing claims were 2137k in the week ending 9 April, a 39k decline from the prior week’s revised figure of 2176k (previously reported as 2171k). April Private Payrolls Tracking update: After incorporating today’s initial and continuing claims data and results from the April Philly Fed survey, the April Private Payrolls Tracking estimate was little changed at 218k vs. 219k previously."
Key Quotes:
"The Philly Fed manufacturing index declined to -1.6 in April from 12.4 in March. The ISM-adjusted index, which takes into account the subcomponent of the report, also declined sharply to 43.1 from 51.7. Today’s report runs counter to the Empire State manufacturing survey for April, released last Friday, which improved further in April. The measures of current activity reversed all the gains from March. The new orders subindex fell to 0 after increasing to 15.7 in March while the shipments subindex cratered, declining over 30 points to -10.8 in April.
Other indicators, such as the unfilled orders, delivery time and, inventories subindexes, either reentered or fell further into negative territory. The employment subindexes—the number of employees and the average workweek subindexes—were quite weak, both falling over double digits to -18.5 and -16.2, respectively.
It appears that the jump sentiment in March could have been a false signal fueled by the rally in equity prices and a pickup in commodity prices. We saw this optimism reflected in other regional and national manufacturing surveys for March, while GDP-relevant data, such as industrial production and durable goods shipments, continued to indicate that activity in the industrial sector was still weak. The one bright note of the report came from the six-month-ahead section, which was somewhat more optimistic in April compared with March.
The headline index increased to 42.2 from 28.8, while expectations for new orders, shipments, and hiring picked up. The general optimism is a good sign that industrial activity may stabilize in coming quarters. So, although industrial activity will likely continue to be weak in the near term, it appears that more firms still expect to see a rebound by the end of the year. We will see how other manufacturing reports, such as the Chicago PMI and the national ISM manufacturing reports, for April perform in coming weeks. Initial jobless claims were 247k (Consensus: 265k) in the week of April 16, marking the lowest level since 24 November 1973. Although the continued decline is positive, some calendar factors associated with Good Friday/Easter might have played a role behind the drop in the week. Moreover, the lower-than-expected initial claims might have been related with a decline in the take-up rate or the share of those eligible actually claiming unemployment benefits. Another possibility is that the improvement in initial claims might be a reflection of low job turnovers. Thus, we think that some of the recent decrease in initial claims is not attributable to changes in the underlying trend of labor markets.
Continuing claims were 2137k in the week ending 9 April, a 39k decline from the prior week’s revised figure of 2176k (previously reported as 2171k). April Private Payrolls Tracking update: After incorporating today’s initial and continuing claims data and results from the April Philly Fed survey, the April Private Payrolls Tracking estimate was little changed at 218k vs. 219k previously."