US data reviewed and Q1 GDP tracker revised down - Nomura

Analysts at Nomura noted the US session's data and offered their reviews and Q1 GDP tracker update.

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Key Quotes:

"Construction spending: Construction spending rose by 0.8% m-o-m in February, falling short of market expectations (Consensus: 1.0%). This report included backward revisions (January was revised up but December was revised down). In the private sector, total construction expenditure was up by 0.8% m-o-m with residential construction outlay increasing solidly by 1.8% m-o-m, marking the fifth consecutive gain. The strength in residential construction might have been boosted by unusual warm weather. On the other hand, non-residential construction spending dropped 0.3% m-o-m following a 0.2% decline in the previous month. Among non-residential construction, retail-related construction outlay dropped sharply by 5.4% m-o-m. This metric tends to be volatile but the fall in retail-related construction could have been a reflection of weakness in brick-and-mortar shops. In the public sector, construction spending was up 0.6% m-om with upward revisions to the prior month. 

ISM Manufacturing: The Institute for Supply Management (ISM) reported expanded activity in the manufacturing sector in March. The headline index registered an elevated reading of 57.2, in line with market expectation (Nomura: 56.5, Consensus: 57.2) although slightly lower than 57.7 in February. Production and new orders indexes slipped slightly but remained elevated at 57.6 and 64.5, respectively. The employment indicator also improved (58.9), suggesting that the labor market conditions in the manufacturing sector continued to strengthen over the month, consistent with the upbeat gains in manufacturing payrolls seen in January and February. The new export orders index improved to 59.0 while imports index remained elevated at 53.5, pointing to healthy demand abroad.

Vehicle sales: Total auto sales were softer than expected, slowing to an annual rate of 16.53mn units in March from 17.47mn units in February. Domestic light vehicle sales were 12.97mn units saar. Despite deep discounts and incentive spending, auto sales surprised on the downside (Nomura: 17.2mn, Consensus: 17.3mn). Auto sales may fluctuate month to month. But in the medium term, we think auto sales may remain weak, partially driven by industry-specific factors such as recent tightening of lending standards for auto loans and deterioration in the delinquency rate of auto loans. 

Q1 GDP tracking update: Compared to our expectations, non-residential private construction was weaker, suggesting less Q1 business investment. As a result, our Q1 GDP tracking estimate was revised lower by one-tenth of a percent to 0.8% from 0.9% previously. The net impact from weaker-than-expected auto sales in March was muted as the negative impact from less auto consumption was offset by the increase in auto inventories."