Saturday, November 29, 2014

US Week Ahead: NFP, ISMs, Trade Balance, Beige Book, Factory Orders, Housing

The November ISM manufacturing PMI likely retraced to 57.8, remaining at a high but more sustainable level. The November Chicago PMI retreated several points, almost fully reversing the nearly 6-point gain in October. The preliminary US Markit manufacturing PMI also continued its descent in November, falling slightly over a point to 54.7. But on balance, regional manufacturing surveys indicate robust growth in manufacturing activity. The ISM weight-adjusted Empire State manufacturing index rebounded, while the adjusted Philly Fed index rose several points to a more than ten year high. The forward-looking components of the October ISM survey also suggest another strong reading in November. In particular, the new orders index moved over 5 points higher to 65.8, nearly touching a post-crisis high. We expect a slip in the ISM manufacturing index to a level more consistent with its 12-month average of around 55.8. October construction spending likely rebounded 0.5% following two consecutive monthly declines. We expect a bounce-back in October construction spending of 0.5%. Both private non-residential and public sector spending posted declines in the prior two months. We expect non-residential construction spending to rebound given strong growth in commercial property prices since September. Residential construction, which increased 0.4% in September, likely rose at a stronger pace in October based on encouraging housing data. Construction of housing units jumped in October, rising at a 1.4% annual rate after virtually flat readings in the prior two months. October housing starts were also strong, rising over 4%. On balance, October construction spending likely rose 0.5%, more than reversing the previous month’s decline

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