US: Construction spending and vehicle sales data in focus – Nomura

In view of analysts at Nomura, construction spending and vehicle sales data are going to be the key economic releases for today’s US session apart from the NFP data.

Key Quotes

“Construction spending in Q2 was dampened by weak public spending and private residential spending. We expect this weakness to continue in Q3. Public spending has been decreasing for the past 7 months on a year-over-year basis. Especially, public outlays on highway and street construction, which constituted 32% of total public construction outlays in 2016, fell for the eighth consecutive month in June. Public construction projects have been stagnating as skilled construction labor remains scarce and local and state governments struggle to find funding for these projects. As for private sector outlays, residential construction may slow, driven by slowing new multifamily construction projects. With an elevated level of the rental vacancy rate, it is possible for this downtrend to continue. Consensus expects a 0.5% m-o-m increase in construction spending for July.”

“Vehicle sales: We expect auto sales to slow further to 16.5mn saar units in August, from the 16.7mn pace in July (Consensus: 16.6mn saar). Hurricane Harvey, which hit the Texas Gulf Coast area in late August, poses a modest downside risk to our forecasts. Although Harvey’s impact on August auto sales will likely be small as it made its landfall late in the month, its impact will likely be concentrated on sales in the following months. Overall, consumer fundamentals have been favorable. Strong labor markets with low unemployment and healthy job creation would continue to support consumer demand in the near term. However, as used vehicle prices continue to trend lower, competition from the used vehicle market has been increasing. Moreover, given the already-elevated levels of incentive spending by automakers, auto sales in 2017 could continue to struggle compared with the previous year, which may have an adverse impact on vehicle production.”