Key U.S. Data Releases and Events

Next week, indicators as a whole are going to be tilted on the downside, as April construction spending is expected to decline, May motor vehicle sales will slide to 14.2 million units, and payroll employment likely dropped by close to 85,000 jobs last month. Leading ISM indicators for May are expected to be reported near the break-even mark, but "prices-paid" indexes likely drifted higher in response to recent announced price increases in selected manufacturing industries and further upward pressure on diesel fuel prices.

KEY U.S. DATA RELEASES THIS WEEK

Monday, June 2 – Construction Spending (Apr.)

Construction Put in Place
Global Insight: -0.3%
Consensus: -0.6%
Last Actual: -1.1% (Mar.)

Construction Excl. Residential Improvements
Global Insight: -0.4%
Last Actual: -0.4% (Mar.)

What t Look For

• Overall construction spending is expected to decline by 0.3%.

Implications

We are expecting another sizable drop in single-family construction, and another drop in multiple-family units. These will be partially offset by increases in private nonresidential and public construction. Added together, we project that construction spending fell 0.3% in April; excluding improvements, the drop will be 0.4%.

Monday, June 2 – ISM Manufacturing Index (May)

Global Insight: 48.8
Consensus: 48.4
Last Actual: 48.6 (Apr.)

What to Look For

• The overall index is expected to be about unchanged.

Implications

The ISM manufacturing index is expected to post a token increase, but remain under the 50 line, at 48.8, up from a mildly bearish 48.6 in April. The manufacturing sector continues to struggle, caught in the crossfire between slumping construction and auto sales and surging exports.

Tuesday, June 3 – Motor Vehicle Sales (May)

Global Insight: 14.2 Mil.
Consensus: 14.6 Mil.
Last Actual: 14.4 Mil. (Apr.)

What to Look For

• Light-vehicle sales likely slid down to 14.2 million units.

Implications

Our projection for May light-vehicle sales is 14.2 million units. The same factors that held down April sales prevailed through May. High gas prices will continue to transform the passenger car/light truck mix, with unit car sales volume projected to outpace the light truck sector for the third consecutive month, the longest such streak since 2000.

Wednesday, June 4 – ISM Nonmanufacturing Index (May)

Global Insight: 51.1
Consensus: 51.0
Last Actual: 52.0 (Apr.)

What to Look For

• The composite index is expected to edge down slightly.

Implications

The ISM index for services should edge down slightly to 51.1 in May. We expect that business activity picked up a little—as financial markets improved and freight activity showed signs of rebounding, but chain-store and auto sales were weak. The employment index will likely decline by a couple of points.

Wednesday, June 4 – Productivity (Final Q1)

Nonfarm Business Productivity
Global Insight: 2.2%
Consensus: 2.5%
Last Actual: 2.2% (Prelim. Q1)

Unit Labor Costs
Global Insight: 2.2%
Consensus: 2.0%
Last Actual: 2.2% (Prelim. Q1)

What to Look For

• Productivity to be unchanged on higher output and higher hours.

Implications

We are not expecting the initial productivity growth estimate (2.2%) to change. Real output will be revised up by 0.3%, but this will be offset by an upward revision to hours. Unit labor costs will also be unchanged, but look for a significant upward revision to the estimate for the fourth quarter of 2007. Overall, productivity trends remain surprisingly solid in view of the slowdown in real growth.

Friday, June 6 – Employment Report (May)

Nonfarm Payrolls
Global Insight: -85,000
Consensus: -51,000
Last Actual: -20,000 (Apr.)

Unemployment Rate
Global Insight: 5.2%
Consensus: 5.1%
Last Actual: 5.0% (Apr.)

Average Hourly Earnings
Global Insight: 0.2%
Consensus: 0.3%
Last Actual: 0.1% (Apr.)

What to Look For

• Payroll employment is expected to fall by 85,000.
• The unemployment rate should rise to 5.2%.

Implications

The labor market continues to loosen. We expect payroll employment to fall 85,000 in May, worse than April's 20,000 drop. Initial unemployment insurance claims suggest that layoffs are up—although not dramatically—but the weakest evidence is coming from the level of continuing unemployment insurance claims, which is rising sharply. The implication is that those who become unemployed are finding it more difficult to find new work, suggesting that firms have become much more cautious on hiring. We expect the unemployment rate to jump from 5.0% to 5.2% (also based on the high level of continuing claims), while hourly earnings should advance a modest 0.2%.