US data reviewed - Nomura

Analysts at Nomura reviewed the latest key data that gave the dollar a boost on Thursday US session. 

Key Quotes:

Review Empire State survey: Manufacturing activity in the New York area picked up notably during March according to the Empire State survey, consistent with continued strength in the economy. The general business conditions index increased 9.4 index points to 22.5, the highest reading since October 2017. New orders and shipments activity accelerated during the month, with the shipments index in particular reaching a level not seen since 2009. The combination of shipments, orders and more unfilled orders indicates steady near-term momentum. Labor market indicators remained within healthy territory, a good sign for manufacturing payroll growth which has remained a tailwind for overall payroll growth in recent months. Capital expenditures and technology spending outlook both moderated somewhat but remained elevated. The prices paid index rose to 50.3, the highest reading since March 2012, as input price pressures continue to build. However, prices received rose only marginally, implying that pressure on downstream prices may be more modest. Taken altogether, the Empire State survey indicates that manufacturing activity in March remains robust, closing out Q1 on a solid note. 

Philly Fed survey: The Philly Fed survey fell 3.5 index points to 22.3 in March, below expectations (Nomura: 25.0, Consensus: 23.0). Other components of the survey suggest continued expansion in activity in March albeit at a slower pace than in February. The new orders index rose strongly by 11.2 points to 35.7 and the shipments index rose 16.9 points to 32.4, highlighting strong momentum. Unfilled orders remained high, likely reflecting elevated demand. The prices paid index fell 2.4 points to 42.6, implying that price pressure remained firm but eased slightly from February. It appears that the recent announcement on tariffs on steel and aluminum did not affect business outlook materially. Businesses remained highly optimistic with the six-month ahead general business activity index rising to 47.9. The six-month ahead prices paid index fell to 62.8, from 65.2. The decline suggests proposed tariffs did not affect the outlook on input costs materially. This index had been gradually rising before the tariff announcement, likely driven by higher demand for input materials. On the downside, the six-month capex outlook fell to 35.9, from 40.4, portending some easing of equipment investment. 

Import prices: It appears the weaker US dollar is pushing up import prices modestly. Import prices rose steadily by 0.4% m-o-m in February despite a 0.5% decline in volatile petroleum prices. Excluding petroleum products, import prices showed a strong increase of 0.5% (0.53%) m-o-m, marking the highest gain since April 2011 (on an unrounded basis). More important, imported consumer goods prices excluding autos, food and energy jumped 0.5% m-o-m. The last time this metric rose by more than 0.5% was a 0.7% advance in January 2014. Within this category, the strength was broad-based as prices of imported apparel, household goods, recreational equipment & materials, medical goods and home entertainment equipment all rose. A key question is whether and how the recent stabilization of imported goods prices will affect domestic consumer prices. On a y-o-y basis, inflation of core goods prices of CPI and PCE has been much weaker than that of corresponding import prices, suggesting domestic factors may be playing a greater role in holding down core inflation. Given import prices for air passenger fares, an input for the core PCE price index, were slightly stronger than we had assumed, we revised up our forecast for February core PCE inflation to 0.2% (0.233%) m-o-m or 1.6% (1.587%) y-o-y, from our previous estimate of 0.212% m-o-m or 1.565% y-o-y.

 Initial jobless claims: Initial claims remained low during the week ending 10 March, down 4k to 226k. Continued claims picked up 4k to 1879k in the week ending 3 March, with the insured unemployment rate at 1.3% — its historical low. Labor-related indicators of the business surveys released today suggest that the labor market remains firm. We maintain initial and continuing claims will likely stay low. 

NAHB housing market index: The NAHB housing market index fell to 70 in March, below expectations (Nomura: 71, Consensus: 72), from 71 in February. The decline appears to have been driven by a modest decline in the future sales index. Home builders’ optimism remained high likely driven by elevated consumer demand. Demand appears healthy although the index of prospective buyer traffic eased to 51, from 54. Builders reported an ongoing challenge in finding buildable lots. Rising building material costs will likely weigh on home builders’ sentiment as well although there was no comment on the implications of the recently proposed tariffs on costs."