Around the World – Week of September 11th Update

Author: Portfolio Specialist Group

September 11, 2017

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

Weekly Market Review

BANK OF CANADA HIKES RATES ONCE AGAIN

  • The Bank of Canada (BoC) held firm on its plans of normalizing policy rates, raising the overnight rate by 25 basis points to 1%, which follows a similar hike in July.
  • The move comes in light of strong economic growth during the second quarter, expanding at the fastest quarterly pace in six and a half years. Markets were caught off guard by the hike, which resulted in the Canadian dollar appreciating sharply and yields moved higher across the yield curve.
  • The BoC’s accompanying remarks were decidedly hawkish, stating the removal of “considerable” stimulus is warranted, which may suggest a third hike before year-end.

CANADIAN ECONOMY CONTINUES TO ADD JOBS

  • The Canadian economy added 22,000 jobs in August, recording a ninth-straight month of positive growth. The better-than-expected result lowered the unemployment rate to a cycle-low of 6.2%.
  • Beyond the headline number, full-time positions fell by 88,100 as part-time work fully supported August’s gain. Total hours worked inched lowered as well, down 0.1%. Positively, wage growth picked up to 1.8% annualized, from 1.3% previously.
  • Regionally, Ontario led with 31,000 new jobs, bringing the province’s unemployment rate to a 17-year low of 5.7%. Still, Manitoba and British Columbia hold the lowest jobless rates in Canada at 4.9% and 5.1%, respectively.

ECB DEFERS DECISIONS TO OCTOBER

  • The European Central Bank (ECB) held policy rates unchanged at its September meeting. The ECB offered little on easing plans beyond December’s expiration of the €60 billion monthly purchases currently in place.
  • The ECB stated “the bulk of these decisions will be taken in October”, though did refer to “calibration” of easing measures, which could be interpreted as continuation into 2018.
  • Affected by the strengthening euro, reaching three-year highs during the week, inflation expectations were marked down over the next two years. Growth forecasts were revised slightly higher this year to 2.2%, though unchanged for 2018 and 2019 at 1.8% and 1.7%, respectively.

OTHER ECONOMIC NEWS

  • The U.S. ISM Non-Manufacturing PMI rose 1.4 points to 55.3 in August. Business activity, new orders and employment all improved during the month as 15 of 17 industries reported growth. The positive month was not enough to fully erase July’s significant drop, which fell to 53.9, and still held the latest print below 2017’s average of 56.2.
  • Canada’s trade deficit narrowed to $3 billion in July, down from around $3.75 billion in the prior month. Exports slumped 4.9%, while imports decreased 6%, both largely due to widespread price decreases. Related to ongoing NAFTA talks, Canada’s trade deficit with the U.S. widened to $2.9 billion in July, while maintaining an aggregate trade surplus with other nations.

What’s To Come

U.S. INFLATION AND CANADIAN HOUSING

  • The U.S. reports August inflation data on Thursday ahead of the Federal Reserve meeting next week. Canadian data features an updated on housing with existing home sales and housing starts reported on Monday. August’s industrial production will be released from several countries through the week, including the U.S., eurozone, China and Japan.

Download the Summary

 

Written by

Portfolio Specialist Group

AGF Investments Inc.

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