Around the World – Week of August 14th Update

Author: Portfolio Specialist Group

August 14, 2017

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

Weekly Market Review

TRUMP’S “FIRE AND FURY”

  • Geopolitical tensions reignited as bravado between North Korea and the U.S. ratcheted higher. Word spread during the week that North Korea may have developed a miniature nuclear warhead that could strike the U.S. military base in Guam.
  • President Trump hastily replied that North Korea would “be met with fire, fury and frankly power” if threats continue. Trump did not back off his comments, later stating he may not have been tough enough and that he has not ruled out a preemptive strike against North Korea.
  • Whether this war of words will materialize into an armed conflict remains uncertain, but financial markets were spooked regardless. The VIX, or volatility index, surged to a five-month high and gold prices rallied during the week.

CANADIAN HOUSING CONTINUES TO TREND UPWARDS

  • Housing starts in Canada beat expectations with a 4% monthly improvement in July, which is the second strongest result in the last year.
  • Condos fully supported the gain with a 9% increase, as single-detached homes fell during the month, down 4%. British Columbia posted the largest number of housing starts and Alberta showed further signs of recovery with a strong gain.
  • In a separate report, Canadian building permits rose 2.5% in June, with strong gains in both condos and commercial business structures.

U.S. INFLATION REMAINS SUBDUED

  • Slowing inflation continued in the U.S. as July’s CPI rose only 0.1%, to 1.7% annualized. After peaking in February, inflation levels have drifted lower, which may prove to be more than a “transitory” concern as described by the U.S. Federal Reserve.
  • Shelter, medical care and food prices rose during the month, while energy prices declined slightly. New vehicle sales suffered the largest decline since 2009, falling 0.5% in July.
  • Core inflation, which removes volatile items, matched the headline measure at 1.7% annualized.

OTHER ECONOMIC NEWS

  • China’s inflation grew 1.4% annualized in July, slipping slightly from the prior month and still well below the central bank’s 3% target. The Producer Price Index (PPI), which measures trends within wholesale markets, was unchanged for the third straight month at 5.5%, helped by a rally in domestic steel prices.
  • The U.S. Job Openings and Labour Turnover Survey, or JOLTS, reached a record high after surging 8.1% in June. It was the highest monthly increase in nearly two years. The job openings rate also matched a record 4.0%, while the hire rate was unchanged at 3.7%. The difference between the two suggests current unemployment is mostly structural, adding further evidence that the U.S. jobs market remains strong.

What’s to come

EUROZONE GDP, SEVERAL INFLATION UPDATES AND U.S. HOUSING

  • Eurozone GDP and inflation reports ahead of the Jackson Hole Symposium on August 24th highlight a busy week of economic data. Several other countries will release July’s inflation data, including Canada and the U.K. The U.S. will report the latest retail sales Tuesday as well as housing starts and building permits on Wednesday.

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Written by

Portfolio Specialist Group

AGF Investments Inc.

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