Around the World – Week of October 10th Update
Author: Portfolio Specialist Group
October 10, 2017
“A recap of last week’s top economic news and what’s to come”
Weekly Market Review
U.S. SEPTEMBER PAYROLLS FALL SHARPLY DUE TO STORMS
- Disruption caused by Hurricanes Harvey and Irma was evident in U.S. employment, though is expected to carry only temporary effects. A 33,000 decline in nonfarm payrolls was the first negative month since 2010, missing expectations for a modest gain.
- Most weakness was found in the leisure and hospitality industries, and services also suffered in September.
- Positively, the participation rate rose to 63.1%, causing the unemployment rate to reach 16-year lows of 4.2%, down 0.2% in the month. As often the case with high employment levels, average hourly earnings rose 0.5% in September, lifting the rate to a cycle-high of 2.9%.
CANADIAN EMPLOYMENT STRENGTHENS
- Canadian employment improved for a tenth consecutive month adding 10,000 jobs in September. Average hourly earnings were 2.2% higher year over year after a strong 0.4% increase.
- Full-time positions surged 112,000, the second largest monthly increase in 40 years, and was more than enough to offset the 102,000 part-time jobs lost. Goods-producing industries led the gain, with notable strength in construction. Services industries were largely flat in September.
- Canada’s unemployment rate held steady at 6.2% during the month. Over the past year, eight of 10 provinces have seen their unemployment rate fall, with the exception of Nova Scotia and Newfoundland.
MANUFACTURING ACTIVITY SPIKES IN THE U.S., EUROZONE AND JAPAN
- The U.S. ISM Manufacturing Composite Index gained a solid 2.0 points in September, reaching a 13-year high of 60.8. 17 of 18 industries expanded during the month with broad-based strength in production, employment and new orders. The non-manufacturing PMI was even stronger, recording a 4.5 point jump in September to a level of 59.8.
- Elsewhere, the eurozone manufacturing PMI rose to 58.1 and is on track for its strongest year of expansion in a decade.
- Manufacturing activity in Japan reached 52.9, the highest level since May, while the China Caixin PMI slipped 0.6 points to 51.0 in September.
OTHER ECONOMIC NEWS
- Eurozone retail sales fell for a second straight month, widely missing expectations with a 0.5% drop in August. This reduced annualized sales growth to only 1.2%, down sharply from 2.3% in the prior month. Also reported, the eurozone unemployment rate held at 9.1% in August.
- The U.S. House of Representatives passed a budget resolution, serving as the first step towards the Republicans passing a long-awaited tax reform plan. The resolution, which passed by a vote of 219 to 206, included instructions for budget reconciliation. The US$4.1 trillion budget is likely subject to numerous amendments before being officially signed into law.
What’s to come
U.S. INFLATION AND CANADIAN HOUSING
- The U.S. will report September’s inflation and retail sales, though both of which are expected to be skewed by hurricane disruptions. In a shortened Canadian work week, housing starts and building permits will be reported. Eurozone industrial production, reported Thursday, will be closely watched by the European Central Bank ahead of its October 26th policy meeting.
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