NEWS / Foreign Exchange

Manufacturing ISM, Non-manufacturing ISM, Nonfarm Payroll & U Rate, Wholesale Inventories

Manufacturing ISM (March, Monday 10.00 am)

Forecast: 51.0 Consensus: 51.2 Prior: 52.3

Regional activity indicators suggested that manufacturing worsened on a national scale in March. The Empire State Index ??“a gauge of manufacturing activity in the Federal Reserve district of New Yorkplunged to 1.9 in March from 24.4 in February. Meanwhile, the Philadelphia-Fed Index fell from 0.6 to 0.2 in March, indicating virtually no expansion in the region. Therefore, we expect the Manufacturing ISM Index to moderate on weakening new orders, production and employment. These trends could be partially offset by a modest rebound in inventories.

Non-manufacturing ISM (March, Wednesday, 10.00 am)

Forecast: 53.8 Consensus: 55.5 Prior: 54.3

Activity in the services sector is likely to continue easing in tandem with the observed moderation in employment growth. This is consistent with our baseline scenario of lower economic expansion in 2007. The Non-Manufacturing ISM Index would stand at 53.8 in March, the lowest in almost four years.

Nonfarm Payroll & U Rate (March, Friday 8.30 am)

Forecast: 135K, 4.6% Consensus: 128K, 4.6K Prior: 97K, 4.5%

Unemployment insurance claims eased recently. The four week moving average stood at 316,800 in the week ending March 23rd, 18,200 less than the average of 335,000 in the week ending February 23rd. As weather conditions have improved, employment in the construction sector probably rebounded after cutting 62,000 jobs in February. Thus, we expect employers to add 135,000 jobs to the nonfarm payroll in March following a gain of 97,000 jobs in February. At this rate however, employment creation would remain below the 2006 average of 186,000 jobs per month, showing that hiring activity is moderating. The unemployment rate would raise 0.1 pp to 4.6%; yet, this is 0.34 pp. below the average of the past ten years. A persistently low unemployment rate keeps consistent with a high degree of resources utilization, which has fueled Fed??™s concerns on inflationary risks. Finally, we look for a 0.3% increase in hourly earnings, with the twelve-month change sliding to 4% from 4.1% in February.

Wholesale Inventories (February, Friday 10.00 am)

Forecast: 0.5% Consensus: 0.4% Prior: 0.7%

We look for a 0.5% increase in wholesale inventories as suggested by February??™s manufacturing output, which climbed 0.4%. During Q406 and early in this year, firms scaled back production in order to work down inventories. Recently, this trend seems to be finishing as suggested by the rebound of the ISM Inventories Sub-Index. Lower inventories could lead to further production in coming months.