1. The ISM nonmfg headline index stays unchanged at 55.4 in May. A slight decline in the new orders index (by 1.1 points to 57.1) is offset by a small rise in the business activity index (by 0.8 points to 61.1). The employment index rises modestly from 49.5 to 50.4, while the supplier deliveries index weakens half a point to 53. Although the inventory indexes (both inventory change and sentiment) rise strongly (by 8 and 7 points, respectively), these figures are not seasonally adjusted and it is hard to interpret inventory changes in the non-manufacturing sector.
2. We are raising our estimate for tomorrow's nonfarm payrolls release for May to +600,000 from +500,000 previously. This is composed of a Census contribution of +450,000 (vs. +350,000 in our previous estimate) and a private sector contribution of +150,000 (unchanged). We also expect the unemployment rate to decline from 9.9% to 9.7% and average hourly earnings to rise 0.1% (both unchanged from our previous estimate).
3. Factory orders rose 1.2% in April, a bit below expectations. There were few surprises in the durable goods components. Nondefense capital goods orders ex aircraft fell 2.6% but this followed a revised 6.7% gain in March.