AGF Weekly Perspectives – November 20th Update
Author: Portfolio Specialist Group
November 20, 2017
“A recap of last week’s top economic news and what’s to come”
Weekly Market Review
Canadian and U.S. inflation cools
- Canadian inflation moved lower to 1.4% annualized, from 1.6%, as gasoline prices decelerated 3.2% in October. An average of the Bank of Canada’s three core inflation measures was unchanged at 1.6%.
- U.S. inflation increased 2.0% year over year in October, a reduction from 2.2% in the prior month, as hurricane-related effects pass. Energy prices fell by 1% and food prices were unchanged during the month. Core inflation rose 0.2%, improving the annualized rate to 1.8%.
- Also reported, U.S. retail sales rose 0.2% in October, an impressive result considering the increase was on top of September’s elevated levels. On an annualized basis, retail sales climbed 4.3%.
Housing activity picks up
- Canadian existing home sales improved for the third straight month with a 0.9% increase in October, though lagged year-ago levels by 4.3%. Home prices declined during the month ahead of tighter mortgage rules, but are 9.7% higher than a year earlier.
- U.S. housing starts surged in October with a 13.7% increase from the prior month. Activity was widespread across the country with the South rebounding strongly, a positive indication that hurricane disruptions are fading.
- U.S. building permits also increased 5.9% in October, led by plans for multi-unit development.
Eurozone data mixed
- Eurozone GDP grew 0.6% in the third quarter of 2017 to 2.5% annualized. Germany, the region’s largest economy, drove the growth with GDP rising 0.8%.
- Inflation slipped to 1.4% as marginally higher prices for gas and accommodation were more than offset by lower prices for telecommunication and clothing. Core inflation held at 0.9%, still well below the central bank’s 2% target.
- Industrial production in the eurozone fell 0.6% in September, the first decline since June, reducing annualized growth to 3.3%.
Other economic news
- U.K. inflation was unchanged in October, holding at a five-year high of 3%. Core inflation was also unchanged at 2.7%. Unemployment in September was 4.3% and wage growth remained at 2.2%, through declined 0.6% year over year in real terms. This could pressure retail sales in future months, which rose 0.3% in October.
- Chinese data disappointed with industrial production, retail sales and fixed-asset investments all missing expectations in October. Industrial production grew 6.2% annualized, well below the prior month’s 6.6% pace. Retail sales also underwhelmed China’s high standards, with 10% annualized growth during the month. Fixed-asset investments grew 7.3% year over year after a slowing activity in the private sector.
What’s to come
Global manufacturing data
- The U.S., the eurozone and Japan report November’s manufacturing PMI activity during the week. Economic data is relatively light elsewhere, highlighted by Canadian retail sales, U.S. durable goods orders and U.K. GDP.