AGF Weekly Perspectives – November 13th Update
Author: Portfolio Specialist Group
November 13, 2017
“A recap of last week’s top economic news and what’s to come”
Weekly Market Review
Canadian housing improves
- Canadian housing starts rose 223,000 annualized units in October, keeping 2017 on track to record the largest number of new starts in a decade. Multi-unit starts fully supported the gain with a 12.5% monthly increase and the 12-month tally reaching the highest level since 1990. Single-family starts contracted, falling 17% in October.
- Regionally, British Columbia led the gain with Quebec close behind, reporting its second-best month in five years. Ontario continued to cool, down nearly 40% from August’s highs, though remains on pace for its best year since 2004.
- Also reported, building permits rose 3.8% in September. Strong growth in non-residential plans more than offset a small decline in residential permits, which could face further headwinds with B-20 lending restrictions and further rate hikes expected in the coming months.
U.S. pushes forward with tax plans
- Plans for U.S. tax reform continued forward with the Ways and Means Committee passing its version of legislation on Friday. Hopes are to clear the bill through the House by mid-November, though expected opposition will likely force amendments, which could push the timeline out further.
- The U.S. Senate revealed its plan would delay cuts to the corporate tax rate until 2019, a move that could save US$100 billion or more. This conflicts with President Trump’s desire for immediate cuts.
- Growing pessimism around the prospects for meaningful U.S. fiscal reform pushed gold prices higher and weakened the U.S. dollar during the week.
Eurozone retail sales surprise to the upside
- Eurozone retail sales handily beat expectations with a 0.7% gain in September, bringing the annualized rate to 3.7%.
- A 5.1% annualized jump in non-food products such as clothes, furniture and electronics supported the strong rise. The food, drink and tobacco category rose 3.2% annualized.
- Current levels are now at two-year highs, helped by sales in Italy, growing at the fastest pace in seven years.
Other economic news
- German industrial production slipped 1.6% in September with declines in both capital goods and energy output. Though some normalization was expected after August recorded the largest monthly gain in six years, September’s decline was worse than expected. On an annualized basis, German production is growing at a rate of 3.6%.
- U.K. industrial production improved by a better-than-expected 0.7% in September, driven by manufacturing output. The fastest pace of growth this year marked the sixth consecutive month of improvement and is the longest such streak in nearly 25 years. After ending the third quarter with solid growth of 1.1%, annualized industrial production is 2.5% higher in the U.K.
What’s to come
Global inflation updates
- Canada, the U.S., the eurozone and the U.K. are set to report October inflation data during the week, having significant implications among their respective central banks. The U.S. will also report housing starts and retail sales during the week, as the eurozone reports Q3 GDP and industrial production.
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