Major surprises on the upside have been reported by recent regional manufacturing surveys in the US. The optimist swing might indicate towards a huge jump in March’s Institute for Supply Management’s (ISM) reading.
“We expect the index to improve to 53.2, a reading that would put it above the 50-mark for the first time since last August”, says Societe Generale.
This will also mark the highest index level since February 2015. However, the high level does not signify that the weakness in manufacturing is over. But it seems that the manufacturing sector has turned the corner after bottoming in December.
“Similarly, we expect the final reading of the Markit manufacturing PMI to get marked up to 52.4, after a preliminary reading of 51.4”, added Societe Generale.
Meanwhile, nonfarm jobs in the US are expected to have rebounded in March from February. According to Societe Generale, 249k nonfarm jobs are expected to have been created this month as compared with February’s 242k. It added that jobless rate is likely to have declined to 4.8%. This rate will match the FOMC’s latest forecast of the longer-run neutral rate of 4.8%. According to FOMC, the jobless rate is likely to eventually reach 4.7% by the end of 2016 and continue undershooting NAIRU in the following years.
“Despite an early survey period, we believe that the continued tightening in the labor market will be reflected in a 0.3% snap back in average hourly earnings. Our forecast would leave the yoy growth rate of average hourly earnings at 2.2%”, says Societe Generale.
