Downside Risks to Next Week's Key US Economic Data

I can see downside risks to this coming week's key US economic data for April.  They should be a positive for Treasuries, but a negative for stocks and the dollar.


                                            My Estimate            Consensus              March Print        Actual
April Mfg ISM                        50.0                         51.4                        51.8                     50.8

April Non-Mfg ISM                54.0                         54.7                        54.5                     55.7

April Payrolls                          175k                        200k                        215k                  160k

Evidence:

Mfg ISM
1.  April Mfg ISM Seasonal Factors subtract 0.7 point more from the m/m change than they did in April 2015.

         a.  Seasonal Factors subtracted less from the Mfg ISM's March change in 2016 than in 2015, so contributed to the m/m increase in the March March ISM in last month's report.

2.  Phil Fed Mfg Index fell in April, correctly predicting the direction of Mfg ISM in each of the past two months.

            a.  Market Mfg PMI also fell in April, but it does not track the direction of Mfg ISM well.

3.  The New Orders Component jumped to a very high level in March and risks coming off in April.

Non-Mfg ISM
1.  April Non-Mfg ISM Seasonal Factors also subtract 0.7 pt more from the m/m change than they did in April 2015.

            a.  Seasonal Factors subtracted less from the Non-Mfg ISM's March change in 2016 than in 2015, so contributed to the m/m increase in the March March Non-ISM in last month's report.

Payrolls
1.  Some components of March Payrolls looked too strong relative to trend and underlying activity -- in particular, retail and construction jobs.   So, the risk is that they post smaller gains in April.

2.  Claims data point to a speedup in Payrolls, but they are not a reliable predictor.