US: Industrial production and housing starts data in focus – Nomura

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 17, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    Research Team at Nomura, suggests that the release of US industrial production and housing starts data will be keenly watched by investors apart from the producer prices and weekly chain store sales data.

    Key Quotes

    Housing starts: Data on housing starts and building permits have provided some positive signs for residential construction demand and activity in the near to medium term. While multifamily starts have returned to pre-recession levels, single-family starts, which have lagged behind, grew 10% last year. We expect solid gains to continue this year, due to improving labor markets and incomes, low mortgage rates, favorable demographics, and a low supply of homes available for sale. We forecast that there were 1100k starts (Consensus: 1170k) and 1191k building permits (Consensus: 1200k) in January. Note that we expect some temporary slowing in starts in January, due to less favorable weather conditions than prior months, in which the unseasonably warm weather appeared to provide a boost to construction activity.

    Industrial production: The ISM manufacturing survey has been in contraction territory for four straight months. As such, we forecast that manufacturing production remained tepid in January. In addition, we expect a decline in vehicle production in January based on WardsAuto data. The BLS reported that aggregate hours worked in the mining industry fell in January. As such, we expect a fifth consecutive month of decline in mining production in January, as the industry continues to deal with the low energy prices. On the flip side, total production likely saw a boost from colder weather conditions in January (relative to December). As such, we believe that there was more heating demand in January, which likely led to higher utilities production. Taking all these inputs into consideration, we believe industrial production rose by 0.3% in January (Consensus: 0.3%).

    Producer prices: Consensus forecasts that the PPI final demand index declined by 0.2% m-o-m in January and that the final demand index excluding food and energy increased by only 0.1%, likely due to factors such as the strong dollar continuing to exert disinflationary pressure on prices.

    Weekly chain store sales: February tends to be a transitional month, with deep discounts and promotions to move inventory before the spring rush. However, in the latest week, Super Bowl Sunday provided a nice bump to retail categories, such as electronics, and food and beverage. Valentine’s Day and the Presidents’ Day weekend should spur more retail activity.”
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