US: Chicago PMI unchanged, pending home sales declined - Nomura

The Chicago PMI for August remained unchanged from July at 58.9 (Nomura: 61.0, Consensus: 58.5), indicating steady optimism among businesses, explains the analysis team at Nomura.

Key Quotes

“Underlying strength varied across subindices. While the new orders index increased 0.9pp to 61.2, the employment index dropped 5.1pp to 47.5, the first sub-50 reading since March. While the employment index has declined sharply over the past three months, payroll employment growth has been strong, indicating the recent decline could be transitory. The production subindex increased 1.1pp to 61.9, indicating continued strength. Overall, while the headline index remains below the post-election peak of 65.7, businesses continue to show optimism in the current economic environment.”

“Pending home sales: Pending home sales declined 0.8% m-o-m in July, below expectations (Consensus: +0.3%). Moreover, the previous month’s increase of 1.5% was revised lower by 0.2pp to 1.3%. The housing supply shortage continues to weigh on the overall market as competitiveness for available listings continues to increase. Consumer demand remains firm but continued supply issues will likely affect pending home sales. Moreover, July’s decline in pending home sales, the fourth in five months, portends some weakness for upcoming existing home sales.”

“GDP tracking update: Altogether, we lowered our Q3 GDP tracking estimate by 0.1pp to 3.2% q-o-q saar. While personal spending growth in July was below our expectations, upward revisions to prior months were positive to our Q3 tracking. However, personal consumption of autos was stronger than expected, lowering our estimates of auto inventory accumulation in Q3. Additionally, pending home sales were slightly weaker than expected, portending further softness in residential investment this quarter.”