Week ahead: focus will be NFP, Manufacturing - Nomura

Nomura analysts are out with this week's outlook for the upcoming data figures across the markets.

Key quotes (source: Nomura)

US week ahead

We expect a weather-depressed 115k increase in March nonfarm payroll employment with a steady 0.2% m-o-m increase in average hourly earnings (AHE).
ISM manufacturing index (Monday): We expect a steady reading of 59.8 for the March ISM manufacturing survey after a print of 60.8 in February. When adjusted with weights consistent with the ISM survey, both the Philadelphia Fed and Empire State manufacturing surveys point to a further levated reading for the ISM manufacturing index. The industrial sector has been healthy so far in Q1. With the recent changes to tax policy and healthy foreign demand, we expect this strength to continue in the near term.

Employment report (Friday): We expect nonfarm payroll employment in March to increase by 115k, a below-trend reading primarily due to negative payback from February’s weather-related boost. We look for a 110k increase in private payroll employment. According to the San Francisco Fed’s weather payroll model, warmer weather biased up February payroll employment by roughly 90k, largely accounting for the above-consensus print of 313k in February. In a similar situation in early 2017, warmer-than-usual weather in January and February resulted in elevated payroll readings for those months before disappointing prints shortly thereafter. However, despite our below-trend forecast for March, payroll growth in the first three months of 2018 will likely be strong, consistent with a strengthening labor market. Labor market indicators, including initial claims and business survey employment indices, remained in consistently healthy territory during the month. Despite the weather disruption, which may disproportionately affect industries such as construction, we expect a strong 25k increase in manufacturing employment as the manufacturing sector continues to expand steadily. 

We forecast a 0.2% m-o-m increase in average hourly earnings (AHE), corresponding to 2.7% (2.67%) on a 12-month basis. Given where the first of the month falls relative to the BLS survey week (the week containing the 12th), March has no calendar bias for AHE. Finally, we expect the unemployment rate to decline 0.1pp to 4.0% after remaining at 4.1% over the past four months. However, there is some risk that the unemployment rate declines below 4.0% given an unusual increase in labor force inflows in February.

Europe week ahead

UK PMI surveys, March (Tues, Weds, Thurs): While there has been some concern about a rolling-over of these surveys in the euro area recently, the February composite index rose by over a point. At current levels it points to about 0.5% q-o-q GDP growth.

Euro area, preliminary March inflation (Weds): We expect the flash reading of euro area HICP inflation to increase to 1.3% y-o-y in March from 1.2% y-o-y in February, and core inflation also to rise to 1.1% from 1.0%. While currency appreciation may weigh on industrial goods price inflation, we expect that an earlier Easter this year will push up volatile seasonal core inflation components (e.g., package holidays, transport services and accommodation services).

Japan week ahead

February Family Income and Expenditure Survey, real household consumption expenditure (all households) (Friday): We forecast that February real household spending (per household) will be down 0.4% y-o-y and down 2.1% m-o-m. Looking at the household consumption-related statistics released thus far, we note that that February new passenger car sales volumes rose by 1.7% m-o-m and that department store sales declined by 0.9% (seasonal adjustments by Nomura). The February Economy Watchers Survey (household activity-related current conditions DI, seasonally adjusted) also showed a decline in February to follow on from a major fall in January, with consumer sentiment appearing quite weak from a corporate perspective.