What is in store for the week ahead?

The US employment report, albeit on the disappointing side, was the final major piece of economic information before the June FOMC meeting that gives the final “all clear” for a June rate hike, according to analysts at Nomura. 

The markets, for this week, however, will continue to keep a close eye on US data, albeit second tier and a June hike already effectively priced into the dollar. Elsewhere, we have Central Banks, RBA /ECB both meeting and the UK elections as a major event on the 8th June. See here for latest UK polls: ICM poll puts UK PM May's conservatives on 45% vs. Labour on 34% ahead of elections

Nomura's US data scheduled for the week ahead:

"Productivity Q1, final (Monday): A preliminary report for Q1 indicated that nonfarm productivity decreased by an annualized 0.6% q-o-q, a notable slowdown from the 1.8% increase in Q4 2016. Real output growth was slower in Q1 (1.0% q-o-q) than Q2 (2.7%), consistent with weak Q1 real GDP growth. On the other hand, hours of nonfarm private employees increased steadily, in line with continued improvement in the aggregate work hours of the total private sector as reported in recent employment reports. Data on growth in spending during Q1 have been somewhat mixed. However, BLS revised up its second estimate of Q1 GDP by half of a percent to 1.2% q-o-q saar from 0.7% with upward revisions to personal consumption and private investment. This suggests an upward revision to output is likely, which would raise the final estimate of nonfarm productivity for Q1. Consensus expects an upward revision to a 0.2% decline for BLS’ final estimate.

Unit labor costs Q1, final (Monday): In a preliminary estimate by the BLS, unit labor costs increased strongly by an annualized rate of 3.0% q-o-q in Q1, accelerating from a 1.3% increase in Q4. Compensation per hour increased steadily, but real output growth slowed in Q1, pushing unit labor costs higher. However, as a strong rebound is expected in Q2 real GDP growth, it may be possible to see a pullback in unit labor costs as the output growth accelerates sharply. For BLS’ final estimate for Q1, as it is likely that output may be revised upwards, consensus expects the estimated increase in unit labor costs to be revised down to 2.5%.

ISM non-manufacturing (Monday): The headline ISM non-manufacturing index improved to 57.5 in April from 55.2 in March, indicating resilience in business sentiment. In May, other business surveys have been somewhat mixed although still offering high readings. The ISM manufacturing index improved slightly, but the Philly Fed headline index decreased modestly in May. However, solid gains in non-manufacturing sector employment in recent months point to steady activity. In particular, employment in wholesale and retail trade sectors rebounded in April. Additionally, there were steady increases in retail sales data in March and April, suggesting steady momentum in the retail sector which may have carried over to May. Therefore, we expect the ISM nonmanufacturing index to increase moderately to 57.9.

Factory orders (Monday): Durable goods orders and shipments for April came in below expectations. Top-line orders fell by 0.7% m-o-m. Core capital goods orders (excluding defense and aircraft), a leading indicator of business equipment investment, posted a back-to-back flat readings. Moreover, core shipments, an important input into the investment component of GDP, decreased by 0.1% following a 0.2% increase in the prior month. Inventory growth was soft, increasing only moderately by 0.1%, suggesting that businesses remained cautious about inventory investment. Weak readings from durable goods industries pose a downside risk to total factory orders in April. Consensus expects a modest decline of 0.2% in April.

JOLTS (Tuesday): Job openings increased steadily in March for the third consecutive month. At 5743k, vacancy postings were at their highest since July 2016 (the post-crisis peak). The variation in job openings across industries had been quite broad: over the past six months, industries such as manufacturing (+68k) and education & health services (+59k) have gained some momentum, while retail trade (-65k) and construction (-65k) have retreated. Most recently in March, professional & business services posted a large increase of +123k, driving the top-line increase. The job openings rate remained elevated at 3.8%, within the range of 3.5-4.0% seen since March 2015. The ratio of job openings to unemployed workers was at 0.79, well above the pre-crisis peak of 0.7, indicating substantial tightness in the labor market. Moreover, the quits rate remained unchanged at 2.1%, pointing to continued willingness among workers to voluntarily separate from their employers. Given the fall in the number of unemployed in the April household employment survey, a further increase in the vacancy to unemployment ratio would be unsurprising in April. Note this will be the last reading of vacancies and quits before the 13-14 June FOMC meeting. 

Consumer credit (Wednesday): With a steady pace of income gain and job creation, consumer credit has been expanding healthily. Revolving credit, which includes credit cards, increased at an annualized rate of 2.4%. Nonrevolving credit, including loans for education and autos, increased by a solid 6.4%. As consumer fundamentals remain firm, consumer credit is likely to increase steadily in coming months. Consensus expects an increase of $15bn in April. 

Initial jobless claims (Thursday): For the week ending 27 May, initial jobless claims ticked up by 13k to 248k. However, the four-week moving average dropped somewhat in the month of May after stabilizing during the first four months of 2017. For the week ending 20 May, continuing claims declined by 9k to 1915k.The four-week moving average of continuing claims has dropped substantially during 2017. The continued decline in this series broadly mirrors the drop in the unemployment rate over the same period. We expect initial claims to remain low. Also, further decreases in continuing claims in the face of strong payroll gains would not be surprising. Together, these measures indicate continued strength in the labor market as firms become more willing to hold on to their current employees.

Wholesale inventories (Friday): According to an advance report by the Census Bureau, wholesalers’ inventory investment was weak, down 0.3% m-o-m in April. The decline follows a lukewarm increase of 0.1% in March with mixed reading across many product categories. The inventories of autos at wholesalers increased strongly by 1.9% in March, but this increase may have been partially due to lackluster sales in recent months. On the other hand, wholesalers’ inventories of nondurable goods showed broadbased weakness. Excluding petroleum products inventories, which tend to be highly volatile, inventories of nondurable goods fell 0.5% in the month. We could see some alleviation of weakness in April, as oil prices tend to rise robustly during the spring driving season. However, weak advance readings released by the Census Bureau suggest wholesalers, on balance, may have remained cautious. Consensus expects the final estimate for April to be unrevised from the advance estimate."