US: Focus on construction spending and vehicle sales – Nomura

Analysts at Nomura suggest that October’s construction report of US could highlight continued weakness in certain categories for construction spending.

Key Quotes

“While topline construction spending increased 0.3% m-o-m in September, private nonresidential construction expenditure continues to pose a downside risk to firming economic growth. Private nonresidential construction spending for commercial, power, manufacturing and office structures remained soft in September. Increases in online shopping at the expense of brick and mortar stores, a slowdown in revenue growth in the hotel industry, and tighter lending standards for commercial real estate loans could continue to negatively affect private nonresidential construction spending over the medium term. Moreover, an unusually large increase in public construction expenditures in September offset other weakness in private residential construction, which remained flat during the month.”

“Vehicle sales: Residual demand for replacement vehicles after hurricanes Harvey and Irma added a transitory boost to both September and October vehicle sales, at 18.4mn saar and 18.0mn saar, respectively. We expect sales to decelerate to 17.7mn saar in November (Consensus: 17.5mn saar), closer to the underlying trend which we estimate to be somewhere around 16.7mn saar. The majority of replacement buying activity has likely run its course, although some spillover into November is possible.”