Around the World – Week of October 23rd Update

Author: Portfolio Specialist Group

October 23, 2017

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

Weekly Market Review

CANADIAN INFLATION STILL BENIGN, RETAIL SALES MODERATE

  • Canadian consumer prices rose 0.2% in September, lifting the annual inflation rate to 1.6% in September, from 1.4% in August. The increase was driven by higher energy prices as a result of hurricane-related disruption. Core prices edged slightly higher but remain well below the Bank of Canada’s 2% target.
  • Retail sales data was disappointing in August, falling 0.3%. Automobile sales remained solid, rising 1.1% in August, while gasoline sales rose 3.1% alongside higher gas prices. Without auto and gasoline sales, however, sales fell 1.3% in August, though remain 4.5% higher relative to last year.
  • Economic data has started to cool, which has reinforced the theme that economic growth is likely set to cool following the strong run during the first half of the year. The Bank of Canada may keep rates unchanged at its upcoming meeting on October 25th as it has stated that it wants to see how the economy reacts to the two recent rate hikes and the stronger dollar.

U.S. HOUSING CONTINUES TO COOL

  • U.S. housing starts declined 4.7% in September to the lowest levels this year and have now pulled back in six of the last seven months. Both single- and multi-family starts declined, falling 4.6% and 6.2%, respectively. Hurricanes continue to weigh on data as the largest losses occurred in the South.
  • Existing home sales rose unexpectedly in September following three consecutive declines, led by a rebound in Houston but tempered by a pullback in Florida. Sales rose in the Midwest and West, held steady in the Northeast and fell unsurprisingly in the South due to hurricane activity. All gains were in single units, the first rise in four months.
  • Building permits also fell by 4.5% in the month with reduced plans for multi-family construction in addition to business closures related to the hurricanes. Single-family permits, however, rose slightly in September.

U.K. DATA MIXED

  • Higher food prices and transportation costs pushed prices in the U.K. to the highest levels in five years with September’s inflation reaching 3.0%. This negatively impacted retail sales, which fell 0.8% in the month and ended the third quarter at the weakest pace of growth in four years.
  • Also reported, the U.K. unemployment rate held at 4.3% in September, matching 1975 lows. Though the headline number was unchanged, underlying conditions improved with the employment rate, which measures those working aged 16-64, moving higher to 75.1%. Wage growth continued to shrink, however, as real earnings fell 0.3% in the month.
  • Despite the conflicting data and a fifth round of Brexit negotiations concluding with little progress, Bank of England Governor Mark Carney reiterated that the central bank is nearing in on an interest rate hike, the first of which in over a decade.

OTHER ECONOMIC NEWS

  • U.S. industrial production rose a solid 0.3% despite the impacts of recent hurricanes weighing on activity. Over the past year, production has risen 1.6% in the U.S. In China, industrial production rose 0.6% from the prior month to an annualized pace of 6.6% in September.
  • The 19th National Congress of the Communist Party of China began during the week. President Xi Jinping delivered his vision to transform the country by 2050 as related to foreign policy, environmental concerns and initiatives against corruption. He also announced a two-part plan for China to become a “great modern socialist country”. Also reported during the week, China’s economy grew 6.8% year over year in the third quarter, meeting expectations.

What’s to come

CENTRAL BANK MEETINGS

  • The Bank of Canada meets on Wednesday, followed by the European Central Bank on Thursday. Although no policy changes are expected, both central banks will be closely watched for indications into future policy plans. October’s manufacturing activity will also be reported in the U.S., the eurozone and China.

Download the Summary for additional market data.

Written by

Portfolio Specialist Group

AGF Investments Inc.

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