US: Nonfarm productivity and Construction spending in the limelight – Nomura

Analysts at Nomura suggest that the US nonfarm productivity growth could increase solidly in Q3, after a strong 2.9% q-o-q saar increase in Q2, based on incoming information on aggregate real output and hours data.

Key Quotes

“We expect a solid 3.4% q-o-q real GDP increase for Q3 and hours growth was somewhat weaker than previous quarters, highlighting the potential for a healthy increase in productivity. Recent productivity trends have been positive relative to an earlier bout of weakness from 2015-16.”

“On a y-o-y basis, productivity growth has remained within a -0.3 to 1.9% range since 2012. The strong increase in Q2 productivity and muted growth in compensation per hour resulted in a 1.0% decline in Q2 unit labor costs.”

“Construction spending: Private construction spending remained weak in August, decreasing 0.5% m-o-m, with softness across all major components. Hurricane recovery efforts may help increase construction activity over the next few months but the effect will likely be spread out.

Public construction spending, on the other hand, particularly for state and local governments, increased strongly in August by 2.0%, driven by healthy building activity in the state and local nonresidential sector.

Incoming data on housing starts indicate continued softness for private construction spending. In addition, it remains to be seen if state and local government outlays will sustain the recent robust pace.”