Analysts at Nomura International plc offered a review of the latest key data.
Key Quotes:
“ISM manufacturing index: The ISM manufacturing index rose to 60.2 in June from 58.7 in May, above expectations (Nomura: 57.7, Consensus: 58.5). It appears that steady business expansion and elevated optimism persisted despite elevated trade concerns. Much of the upside surprise in the topline index in the June report, however, can be attributed to the suppliers delivery index. This measure jumped 6.2pp to 68.2. The most recent jump in this measure of a similar magnitude occurred in September 2017 when major hurricanes caused severe supply chain disruptions. Altogether, the June ISM report suggests that while manufacturers continue to face strong demand despite increased trade tensions, further supply disruptions from trade uncertainty could be material.
Construction spending: Construction spending increased 0.4% m-o-m in May while April’s headline spending numbers were revised down to a 0.9% increase from a 1.8% increase previously. Private single-family residential construction increased 0.6% m-o-m, rebounding from a 0.05% decline in April. Private nonresidential construction declined in May by 0.3% m-o-m as nonresidential commercial and manufacturing construction spending declined.
GDP tracking update:
“Revisions to construction spending data were positive, on net. State and local government construction spending was revised up notably, implying stronger government spending in Q2 than expected. The upward revisions to S&L were partly offset by negative revisions to private nonresidential and residential construction. In addition, private nonresidential construction spending in May was slightly lower than expected, implying less structures investment in Q2. Taken altogether, our Q2 GDP tracking is unchanged at 4.6% q-o-q saar.”
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