Weekly Economic Update

For the week of October 22 – 26.

The week of the Bank of Canada’s policy meeting has arrived. Outside of the central banks interest decision on Wednesday, the only other notable release this week is from wholesale trade sales this morning. As of today, the market implied probability of the Bank of Canada increasing interest rates on Wednesday is 96.4%. Scheduled data releases in the United States this week include Markit US manufacturing PMI, new home sales, wholesale inventories, durable goods orders, and GDP. Also of note, the European Central Bank will be making a rate decision this week on Thursday.

Missed expectations for both retail sales and consumer prices last Friday ended the week on a disappointing note. Retail sales fell by 0.1 percent in August against expectations for a jump of 0.3 percent. July’s 0.3 percent growth was also revised downward to 0.2 percent.

Although economists were calling for growth of 0.1 percent, consumer prices fell by 0.4 percent in September, marking the second straight month of indicator declines. On a year-over-year basis, prices are up by 2.2 percent, dropping from last month’s reading of 2.8 percent.

The Canadian dollar is currently trading up against the US dollar. Today’s expected range is 1.3033 – 1.3133.

Source: Bloomberg

Weekly Economic Update

For the week of October 15 – 19.

Expected data releases in Canada this week include manufacturing sales, retail sales, and the ever-important consumer prices. Manufacturing sales are expected to have dropped by 0.8 percent in August after increasing by 0.9 percent in July. Retail sales are expected to have increased by 0.4 percent on a headline basis in August, and a lesser 0.2 percent when excluding autos. This 0.4 percent increase follows the slightly lower 0.3 percent gain in July.

Economists expect consumer prices will reverse August’s 0.1 percent decline, and will increase by 0.1 percent for the month of September on a month-over-month basis. The Bank of Canada will most likely be watching the results of this release, since their upcoming October 24 policy decision meeting is fast approaching. Currently, there is a 98.2 percent market implied probability of an interest rate hike at this meeting.

Expected data releases in the United States this week include retail sales, monthly budget statement, housing starts, and building permits.

The Canadian dollar is currently trading relatively flat against the US dollar. Today’s expected range is 1.2976 – 1.3076.

Source: Bloomberg

Weekly Economic Update

For the week of October 9 – 12.

It will be a quieter week for data in both Canada and the United States this week. Scheduled releases in Canada include housing starts, building permits, and new housing price index. Scheduled releases in the United States include consumer prices on Thursday, which will be watched carefully. Prices on a headline basis are expected to have increased by 0.2 and 2.4 percent on a month-over-month and year-over-year basis respectively. Excluding food and energy, growth levels are sitting at 0.2 and 2.3 percent respectively.

Employment data exceeded the expected 25.0K on a headline basis, rising by 63.3K. Although part-time positions jumped way higher by 80.2K, full-time positions actually dropped by 16.9K. Wage growth dropped to a level of 2.2 percent from 2.6 percent for permanent employees. As expected overall, the unemployment rate dropped to 5.9 percent.

Nonfarm payrolls data missed expectations for 185K jobs, landing instead at 134K. Hurricane Florence is one of the main factors for the lower than expected release. Despite the miss on the headline figures, the unemployment rate dropped further than expected to 3.7 percent, a shocking 48-year low. Lastly, August’s nonfarm payroll was revised from 201K to 270K.

Both US and Canada government yields are trading flat to 1bps higher with S&P futures lower (-14.5). WTI crude oil is trading higher this morning at $74.71. The Canadian dollar is weaker against the US dollar for the sixth straight session. Today’s expected range is 1.2946 – 1.3046.

Source: Bloomberg

Weekly Economic Update

For the week of October 1 – 5.

Canadian GDP exceeded expectations for the month of July, growing by 0.2 percent on a month-over-month basis, and by 2.4 percent on a year-over-year basis. 12 out of 20 measured industrial sectors experienced increases. Manufacturing was the largest increasing contributing factor (0.13 percentage points), while construction was the largest decreasing contributing factor.

Scheduled data releases in Canada this week include Markit Canada’s manufacturing PMI, international merchandise trade, and employment. September’s employment figures will follow up August’s 51.6K positions. Scheduled data releases in the United States this week include Markit US manufacturing PMI, construction spending, ISM manufacturing, ADP employment change, durable goods, trade balance, and employment. Nonfarm payrolls are expected to release at a level around 185K for the month of September.

The Canadian dollar is up significantly this morning after a deal was reached to include Canada in a trilateral NAFTA deal. Negotiators worked around the clock over the weekend to reach their Sunday deadline. The new deal offers greater access to Canadian dairy to the United States. Further details will be provided in tomorrow’s update. Today’s expected range for the Canadian dollar is 1.2756 – 1.2856.

Source: Bloomberg

Weekly Economic Update

For the week of September 24 – 28.

Canada’s most important scheduled data release this Friday will be July’s GDP update, following up June’s posting of zero percent month-over-month growth rate, and 2.4 percent year-over-year growth rate. Thursday’s scheduled GDP data release in the United States will more than likely be overshadowed by Wednesday’s Fed meeting. As of now, markets fully anticipate (100 percent probability) the Fed will choose to raise interest rates at their meeting.

Canada’s consumer prices for the month of August released in line with expectations. Although prices decreased by 0.1 percent on a month-over-month basis, and increased by 2.8 percent on a year-over-year basis, both releases declined from July’s figures. Transportation was the largest decreasing contributing factor, while clothing and footwear was the largest increasing contributing factor.

Retail sales in Canada met expectations on a headline basis, increasing by 0.3 percent in June after dropping by a revised 0.1 percent. Excluding autos, retail sales jumped to 0.9 percent, exceeding expectations for a 0.6 percent jump.

The Canadian dollar is currently trading down against the US dollar. Today’s expected range is 1.2895 – 1.2995.

Source: Bloomberg

Weekly Economic Update

For the week of September 17 – 21.

Similar to Thursday’s consumer prices release, retail sales for the month of August in the United States missed expectations across the board. On a headline basis, sales grew by 0.1 percent, sitting below the expected 0.4 percent. After excluding autos and gas, sales still only grew by 0.2 percent, missing the expected growth of 0.5 percent. The apparel and clothing category were the main contributing factors for August’s weak performance. However, the upward revisions of July’s growth saved this month’s figures. Headline growth was revised upward from 0.5 to 0.7 percent, while measures (excluding autos and gas) were revised upward from 0.6 to 0.9 percent.

Canada’s scheduled data releases include manufacturing sales, retail sales, and consumer prices. As of now, manufacturing sales are expected to have posted growth of 1.0 percent for the month of July. These releases will likely give investors more clarity on the Bank of Canada’s interest rate hike on October 24 (currently being priced in at an 86 percent probability). Scheduled data releases in the United States include empire manufacturing, housing starts. and building permits.

Both the United States and Canada’s government yields are trading 1 to 2bps higher with S&P futures lower (-2.3). The Canadian dollar is extending last week’s gains vs. the US dollar this morning, ahead of an important deadline for a ratified Nafta agreement this month. Today’s expected range of Canadian dollar is 1.2971 – 1.3071.

Source: Bloomberg

Weekly Economic Update

For the week of September 10 – 14.

The loss of positions was the main focus of August’s Canadian employment results release on Friday. Compared to the expected increase of 5K, 51.6K part-time positions were lost, a great deal of which were focused in Ontario. In fact, part-time positions fell by 92K, while full-time positions increased by 40.4K for the month of August.

Canada’s unemployment rate currently sits at 6.0 percent, up from July’s 5.8 percent. These employment figures will most likely be sufficient for the Bank of Canada to slow down their consideration of accelerating rate hikes.

However, the employment figures in the United States continued to increase for the month of August, with nonfarm payroll increasing 201K positions. Average hourly earnings on a month-over-month and year-over-year basis also exceeded expectations, growing by 0.4 and 2.9 percent respectively. The unemployment rate in the United States remained unchanged at 3.9 percent, despite economist predictions of decreasing to 3.8 percent.

The Canadian dollar is currently trading slightly down against the US dollar. Today’s expected range is 1.3133 – 1.3233.

Source: Bloomberg

Weekly Economic Update

For the week of September 4 – 7.

Despite being a short week, scheduled economic releases for Canada include policy decisions, international merchandise trade data for July, building permit numbers for July, employment figures, and the Bank of Canada’s interest rate decision. Currently,  there is a very small chance (11.6 percent) of a rate hike being implied by the market. However, markets are expecting a 76 percent interest rate hike closer to the October policy meeting.

Scheduled economic releases for the United States include manufacturing PMI, construction spending, ISM manufacturing, trade balance, and employment data. The change in nonfarm payrolls is expected to have increased to a level of 191K for August from the previous level of 157K. The unemployment rate is expected to remain unchanged at 3.9 percent.

The Canadian dollar is trading down significantly against the United States this morning. Uncertainty remains over whether or not an agreement will be reached between Canada and the United States on trade. US president Donald Trump has expressed there is no “political necessity” to keep Canada in the NAFTA agreement. Today’s expected range is 1.3114 – 1.3214.

Source: Bloomberg

Weekly Economic Update

For the week of August 27 – 31.

shutterstock_242365438.jpgFed chairman, Jerome Powell, made his first speech at the Kansas City Fed’s Annual Policy Symposium in Wyoming on Friday. Powell noted the current path of the gradual interest hikes is FOMC’s approach to balancing the expansion shortening if rates move too fast, or overheating if rates move too slowly. Powell acknowledged although unemployment is low, “there does not seem to be an elevated risk of overheating.” He continued to note estimates regarding academic model usage were at best “hazy” navigational guides, further distinguishing the fact that monetary policy is based on economic performance, and one of the main contributing factors to the conservative approach of gradual rate hikes. The Fed chairman said he expects the economy’s “strong performance will continue” and the “gradual process of normalization remains appropriate.”

During an interview in Wyoming on Friday, Bank of Canada Governor, Stephen Poloz, noted although the recent headline inflation of 3 percent is transitory and will eventually reverse, the focus is on the stability of core inflation, which is near its 2 percent target. Poloz also commented digitization is one of the main reasons why not only economies have more capacity to grow without fueling inflation, but also why interest rate normalization by traditional models is slower than predicted. Digitization has already led upward revisions of growth and investment in previous years, and possibly under-reported international trade.

This week will be relatively quiet for Canada; the only notable economic release will be the Q2 GDP figures on Thursday, which is the last piece of important data before the Bank of Canada (BoC) policy meeting on September 5. Although the BoC has previously raised interest rates four times within the last year, market participants are expecting as many as three more future hikes. Major releases in the US this week include wholesale inventories, FDP numbers, personal income/spending data, and the University of Michigan Sentiment gauge.

Both US and Canada government yields are trading flat to 2bps higher with S&P futures higher (+10.3). The Canadian dollar is trading slightly lower this morning after Poloz’s comments this weekend. Today’s expected range of Canadian dollar is 1.2998 – 1.3098.

 

Source: Bloomberg