3 numbers to watch: US ISM Manuf + Prices Paid, Constr. Spending

A big week for US data culminates in the US Employment report on Friday (12:30 GMT) but before then there are plenty of other reports worth looking out for. Starting with today we have the ISM Manufacturing and Construction Spending reports before an Independence Day-induced break, which means that the traditional precursor to payrolls, the ADP Employment report, will not be released until Thursday along with the ISM Non-manufacturing report. Let us dive straight in...

• Jun. US ISM Manufacturing Index (14:00 GMT) to ease a bit: The US manufacturing sector continues to do quite well compared to most other developed economies, but has naturally slowed as weaker global trade growth has seen manufacturers relying on domestic demand for growth. However 53.5, as the reading was in May, still indicates healthy growth of 3% q/q annualised and even the slightly less optimistic forecast for June of 52 is consistent with growth around 2.5% since 1990. New Orders improved quite a bit in May while Inventories declined further into contraction territory and combined these could well keep a hand under US manufacturing during the coming months.

• Jun. US ISM Manufacturing - Prices Paid (14:00) to head lower: As part of the above-mentioned ISM Manufacturing report we have Prices Paid, which have tanked to 47.5 as of May from more than 80 a year ago. The first five months of 2012 have averaged 57.3 compared with 82.1 in the same period last year and provide clear evidence that inflationary pressures have receded as we have repeatedly discussed this year. We do think that a trough in inflation is not far away, however, as the US economy slowly reaccelerates towards the end of the year. Before that though we could see a bit more weakness in inflation in the short term - notably in the core price indices. Consensus expects ISM Manufacturing - Prices Paid to decline further to 45.7 from 47.5.

• May US Construction Spending (14:00) to inch higher? The notoriously volatile series has bounced back a bit in March and April following a weak start to the year and consensus expects another slight gain of 0.2% m/m in May after 0.3% in April. A part of the reason Construction Spending has improved is because of Residential, which is up  7% in the first four months of 2012 compared to the same period last year. Several housing-related indicators are pointing to improvements in this area of the economy though we still look for a drawn out, slow expansion.