Around the World – Week of September 5th Update
Author: Portfolio Specialist Group
September 5, 2017
“A recap of last week’s top economic news and what’s to come”
Weekly Market Review
CANADA REPORTS STRONG GDP GROWTH
- Canada’s economy closed out the second quarter growing at a six-year high, as GDP rose 0.3% in June. 14 of 20 major industries expanded during the month, with goods-producing industries leading the way.
- The strong month equated to Q2 growth of 4.5% annualized, supported by rising confidence, stability in energy prices and continued strength in the jobs market. This led to a 4.6% increase in household spending during the period.
- Following a strong first quarter of 3.7% growth, Canadian GDP is on pace to advance more than 3.0% in 2017.
U.S. EMPLOYMENT DISAPPOINTS
- U.S. nonfarm payrolls underwhelmed in August with 156,000 jobs added during the month. The prior two months were also revised down by a total of 41,000. Manufacturing and construction posted strong employment, while services sectors lagged.
- As a result of the weak report, the unemployment rate rose to 4.4%, up slightly from the prior month though still close to full employment levels.
- Average hourly earnings increased 0.1% in August and were unchanged year over year at 2.5%. Weekly hours worked pulled back to 34.4 during the month, though still 1.9% higher than a year earlier.
EUROZONE REMAINS STRONG AHEAD OF ECB MEETING
- Eurozone inflation reached a four-month high of 1.5% annualized in August, up 0.2% from the prior period. Core inflation was unchanged at 1.2% annualized. The eurozone’s jobless rate held unchanged at 9.1% as well.
- Consumer confidence rose to a new cycle high despite German optimism fading due to a weakening auto sector.
- This latest economic data should be viewed favourably ahead of the European Central Bank’s (ECB) meeting on September 7th where it is expected some clarity will be provided on phasing out quantitative easing, which is currently set to expire in December.
OTHER ECONOMIC NEWS
- A second estimate of Q2 GDP growth in the U.S. was revised higher to 3.0% annualized, a strong improvement from initial reports of 2.6%. Upward revisions in consumer spending and business investment more than offset lessened government spending. Supportive of growth into the second half of 2017, August’s measure of the Conference Board’s Consumer Confidence Index rose to its second-highest level since December 2000. Consumers remain optimistic for both current and future conditions despite uncertainty in Washington.
- Eurozone manufacturing activity remained unchanged and well within expansion territory as August’s PMI measured 57.4. Within the region, U.K. manufacturing surprisingly strengthened to 56.9 amidst futile Brexit negotiations. China’s manufacturing PMI advanced to 51.7 in August as industrial output defied a slowdown in the economy. The U.S. ISM Manufacturing Index also advanced with a strong gain of 2.5 points in August, to 58.8.
What’s To Come
- The Bank of Canada will meet on Wednesday with Bloomberg currently predicting a coin-flip chance of a 25 basis points interest rate hike. Later in the week, Canadian jobs data for August will be reported. The ECB also meets this week. While no interest rate changes are expected, market participants will closely watch for direction on quantitative easing plans in the months ahead.