Around the World – Week of September 18th Update
Author: Portfolio Specialist Group
September 18, 2017
“A recap of last week’s top economic news and what’s to come”
Weekly Market Review
U.S. INFLATION RISES
- U.S. headline inflation rose 0.4% in August, the largest jump in seven months, bringing annualized inflation to 1.9%. Core inflation grew 0.2% and held the annualized rate steady at 1.7% for the fourth-straight month.
- Gasoline prices spiked 6.5% after hurricanes made landfall at the end of the month, though the full effects are expected to be included in September’s inflation print. Food inflation was subdued, up 0.1%, but could face downward pressure in the months ahead after Whole Foods lowered prices at the end of August.
- Also reported, U.S. retail sales fell 0.2% in August, missing expectations for a small gain. The Commerce Department stated Hurricane Harvey had both “positive and negative impacts on sales” as vehicle sales were disrupted, falling 1.6% in the month, yet gasoline purchases rose 2.5%.
CANADIAN HOUSING REMAINS STRONG
- Canadian housing starts advanced higher with a gain of 223,200 in August, bringing the 12-month average to 212,000. Multi-unit starts were particularly strong with the 12-month average reaching the highest level since 1990, while single-unit starts declined during the month.
- Among Canada’s most heated markets, Ontario drove the majority of the gains, adding 95,000 starts and on pace for the most activity since 2003. Toronto starts rose at the fastest pace in nearly a year and a half. British Columbia pulled back in August, though remains at elevated levels.
- Canadian existing home sales rose 1.3% in August, ending a four-month losing streak, though are still down 9.9% from year-ago levels.
BANK OF ENGLAND HOLDS DESPITE IMPROVING DATA
- The Bank of England held its bank rate unchanged at 0.25% and government bond purchases at £435 billion in a 7-2 vote, though hinted at an imminent hike, stating “some withdrawal of monetary stimulus is likely to be appropriate over the coming months”.
- Perhaps prompting the hawkish tone, August inflation levels rose to 2.9% annualized, the fastest pace since the Brexit vote. Core inflation also rose to 2.7%, the highest level since 2011.
- Unemployment fell to 4.3% in the second quarter, however in a troubling sign, wage growth grew only 2.1%, which is below current inflation levels. Labour supply continues to be an issue for the U.K. as net immigration fell to a three-year low amidst Brexit uncertainty.
OTHER ECONOMIC NEWS
- Industrial production in China slowed to 6.0% year over year as the world’s second-largest economy appears to be slowing into the second half of 2017. Fixed-asset investment also disappointed, growing at an 18-year low of 7.8% annualized. Retail sales were up 10.1% year over year, but like other economic reports, were below consensus expectations.
- Several other regions reported industrial production data during the week. Eurozone activity rose 3.2% annualized in July, ticking up slightly in the month. Japanese industrial output fell 0.8% from the prior month, unchanged from initial reports. U.S. activity suffered its worst month in eight years as production fell 0.9%, heavily impacted by Hurricane Harvey.
What’s To Come
U.S. FEDERAL RESERVE MEETS
- The U.S. Federal Reserve meeting will be closely watched for both a potential change to the policy rate and an announcement on balance sheet reduction. U.S. housing starts, building permits and existing home sales will also be reported during the week. An update on Canadian inflation and retail sales, both reported Friday, are expected to increase slightly.