NEW YORK (MNI) – The following is excerpted from Goldman Sachs
comment Thursday:
1. The manufacturing ISM declined less than expected to 50.6 in
August, down only 0.3 point (versus 2.4 points expected) from July. The
details of the report, however, were softer than the headline suggests:
while new orders held up (49.6 after 49.2 in July), the production and
employment indexes both declined (by 3.7 points to 48.6 and by 1.7 point
to 51.8, respectively). Inventories rose (by 3 points to 52.3), pushing
the new orders-inventory gap down to -2.7. The prices paid index
declined 3.5 points to 55.5.
2. Construction expenditures fell by 1.3% (month-over-month), in
contrast to consensus expectations for a small increase. However, the
weaker than expected growth rate in July was more than offset by an
upward revision to earlier months. The level of total construction
expenditures was revised up by 3.6% for July-a large change compared to
typical month-to-month variation in this series. We therefore interpret
the report as a modest positive. Among the components, the release
showed more strength in residential building (once revisions are taken
into account), but some weakness in private nonresidential construction
and state and local government building.
3. We are lowering our forecast for tomorrow’s nonfarm payroll
report to +25k, from +50k previously. The main reason is the
accumulation of evidence of weak hiring in late July and August: a sharp
deterioration in perceptions of job availability in the latest
Conference Board survey, a drop in today’s ISM manufacturing employment
index, another drop in job advertising, and a soft ADP report. Layoffs
seem to have remained low, given steady jobless claims in the 410,000
range, although even here the recent pickup in layoff announcements is a
concern.
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[TOPICS: MAUDS$,M$U$$$]