Weekly Economic Update

For the week of February 29 to March 4

Today in markets:

The Current Account Balance deficit released slightly wider than expected this morning, posting a -$15.38 billion deficit over the fourth quarter of 2015, after a revised deficit of -$15.4B (previously marked at $16.2B) in Q3. As the loonie experiences continued weakness against the USD, businesses are moving away from expensive imported goods and traveling is moving towards domestic vacations. Fourth quarter numbers compare to surveyed expectations of -$15.55B and Q3’s revised deficit of -$15.31B, landing 2015’s deficit to a record -$65.7B, from -$44.9B in 2014.

Industrial product prices were also released, increasing 0.5% over January after declining in February a revised -0.3%. Raw material prices decreased 0.4%, beating expectations of -3.3% and less negative than January’s revised -5.2% decline.

Today in the US, the Chicago Purchasing Manager is expected to release slightly lower in January at 52.5. The Dallas Fed Manufacturing Outlook Level of General Business Activity for February is expected to release at -30.0. Pending home sales are also on the docket looking to increased 0.5% over January and 3.8% on a year over year basis.

The Group of Twenty (G20) meeting of Finance Ministers and Central Bank Governors held last week produced disappointing results for market participants. Policy makers made no further concrete promises to increase the coordination between countries in order to boost growth and combat low inflation. These results, coupled with the market expecting another rate hike out of the US this year and Chinese economic conditions continue to remain gloomy (the nation cut its reserve requirement ratio), the loonie traded weaker in early trading this morning as high as 1.3587 USDCAD. The better-than -expected revision to Current Account Balance numbers is now helping to strengthen the loonie which currently hovers at 1.3530 and as strong as 1.3513 just moments ago.

Today’s expected range: 1.3490-1.3590 USDCAD

For the week ahead:


GDP is the focus this week in Canada, scheduled for release tomorrow morning. Expectations are for a 0.1% growth over December, after a 0.3% in November. Retail sales are expected to be the main driver of the weakness in December after a large uptake in November.   Year over year, the economy’s growth is expected to land flat at 0.0% and the fourth quarter of 2015 is expected at 0.0% annualized growth as continuous low oil prices impact business investment in Canada. On Friday, we’ll see an update to International Merchandise Trade numbers for the month of January. Surveyed respondents expect the trade deficit to widen to -$0.90B up significantly from the -$0.59B deficit in the last month of 2015.  Remember December’s trade deficit narrowed substantially. Expect the weaker Canadian dollar to once again, prop up imports through higher import costs. Economists will watch for non-energy exports to show signs of improving economic conditions.


Tomorrow we’ll see an update to ISM Manufacturing and ISM Prices Paid. Construction spending will also be released. On Wednesday, a release of the US Federal Reserve Beige Book is expected to indicate upward wage pressures in the country (an important factor indicating higher inflation). Factory and Durable Goods Orders are released on Thursday and then Friday rounds out the week with US Trade Balance expected to widen slightly to -$44B in January (from -$43.46B in December). Friday also gives us numbers for Change in Non-Farm payrolls, expected to have increased to 195K in February and the unemployment rate is expected to remain at 4.9%.

Source: Bloomberg

Posted by Concentra Financial Markets

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