Insights and Market Perspectives

Around the World – Week of August 21st Update

Author: Portfolio Specialist Group

August 21, 2017

“A recap of last week’s top economic news and what’s to come”

Weekly Market Review

CANADIAN INFLATION RISES

  • Canadian inflation met expectations with a 0.2% increase in July, to 1.2% annualized. While this is well below January’s peak levels of 2.1%, the latest report is an improvement from the 20-month low reached in June.
  • Gas prices rose 4.6% from a year ago, though this was partially offset by electrical prices, which fell 9.1% in light of reduced rates in Ontario. Food prices have also stabilized after falling 4.0% earlier this year.
  • Excluding volatile items, core CPI moved slightly higher to an average pace of 1.5% year over year.

EUROZONE DATA HOLDS STRONG

  • Second quarter GDP grew 0.6% to an annualized pace of 2.2% in the eurozone. Growth was widespread within the region as Germany continued to lead, Spain showed signs of economic recovery, Italy recorded its 10th consecutive positive quarter and the Netherlands had its strongest quarter of growth since 2007.
  • Also reported, inflation held stable at 1.3% in July. While unchanged from the prior month, this was a significant improvement from the 0.2% levels recorded one year ago.
  • In a separate report, the U.K. recorded its lowest level of unemployment since 1975, at 4.4% in July. Wage growth, however, was 2.1%, which is below current inflation levels of 2.6%.

U.S. DATA MIXED

  • U.S. retail sales doubled expectations with a 0.6% jump in July, the largest monthly gain this year. 10 of the 13 major categories advanced, led by auto sales. Further strengthening the report, June’s sales were upwardly revised to a final reading of 0.3%, much improved from initial post of -0.2%.
  • U.S. industrial production rose 0.2% in July. Despite a slide in manufacturing, which makes up around 75% of total production, the annualized figure is up 2.2%, marking the highest level since 2015.
  • Housing data disappointed in July, however, as housing starts fell 4.8% and building permits for multi-family homes slid 11.2% during the month. Single-family home permits held steady in July.

OTHER ECONOMIC NEWS

  • Canadian existing home sales fell for the fourth consecutive month, down 2.1% in July and 11.9% annualized. In perspective, however, sales are receding from record levels reached in March.
  • China reported a series of disappointing data during the week as retail sales missed expectations with growth of 10.4% year over year. Industrial production grew 6.4% annualized in July, also missing expectations and far lower than the prior month’s 7.2% print. Domestic fixed-asset investment has cooled somewhat, rising 8.3% in the first half of 2017. This was below a consensus estimate of 8.6%.

What’s To Come

  • A relatively light week of economic data will be highlighted by the Jackson Hole Symposium, which will feature speeches by both Janet Yellen and Mario Draghi. Market participants will be watching closely for hints towards potential central bank policy action in the coming months. In Canada, retail sales data will be reported on Tuesday, while the U.S. reports new and existing home sales, as well as durable goods orders during the week.

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Written by

Portfolio Specialist Group

AGF Investments Inc.

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