Around the World – Week of October 2nd Update
Author: Portfolio Specialist Group
October 2, 2017
“A recap of last week’s top economic news and what’s to come”
Weekly Market Review
CANADIAN ECONOMY PAUSES
- The Canadian economy paused in July, missing consensus estimates for a minor increase. Some cooling could be expected, as Canadian GDP averaged monthly gains of 0.4% through the first six months of 2017.
- The flat GDP reading reflected broad weakness with only 11 of 20 major industries expanding during the month, the smallest amount since October 2016. Goods-producing sectors detracted with a 0.5% drop, while service-producing sectors rose 0.2%.
- July’s report serves as the final GDP release leading up to the Bank of Canada’s interest rate decision on October 25th. Along with cautious comments made by Governor Poloz during the week, an additional hike in the near-term appears less likely.
EUROZONE INFLATION UNCHANGED
- Eurozone inflation fell short of estimates in September as prices rose an annualized 1.5%, unchanged from the prior month and still well below the central bank’s 2% target. Core inflation weakened to a three-month low of 1.1% in the eurozone.
- Within the region, Italian inflation slowed, while France saw slightly higher prices.
- In a separate report, Germany’s jobless rate fell once again to 5.6%, another post-reunification low. This mixed data comes as the European Central Bank considers a reduction in monetary easing ahead of its October 26th
ANGELA MERKEL WINS THE GERMAN ELECTION
- The Christian Democratic Union (CDU) won 32.5% of the vote, earning a fourth term for Chancellor Angela Merkel in the German election, which was held on Sunday, September 24th.
- The result was somewhat disappointing as it was the CDU’s worst showing since 1949, falling around 8% from the last election, and forces the formation of a coalition government. The centre-left Social Democrats remained in second place with 20.5% of the vote and have refused to join the coalition party, leaving Merkel to seek partnership with the Free Democrats and Green parties, dubbed the “Jamaica Coalition” in reference to the three parties’ respective colours.
- In a surprise result, the far-right Alternative for Germany party took 13.5% of the vote and will enter parliament for the first time.
OTHER ECONOMIC NEWS
- S. new home sales fell sharply in August, down 3.4%, to the lowest levels this year. Though weather had some impact on new homes, which account for around 10% of total sales, the decline was widespread with three of the four regions reporting contraction during the month. Also reported, U.S. durable goods orders rose 1.7% in August, mainly driven by a 4.9% increase in transportation equipment. Core orders, which excludes non-defense capital goods orders excluding aircraft, were up 0.9% and have now reported positive gains in six of the last eight months.
- In Japan, both headline and core inflation measured 0.7% year over year in August as core prices reached their highest levels since 2015. Japan’s unemployment rate remained at 2.8% for the third straight month and retail sales grew by 1.7% annualized. Industrial production jumped 2.1% from a year ago and manufacturing PMI climbed 0.4 points to 52.6. With an election on the horizon, the significant improvement in the economy bodes well for the re-election of Prime Minister Abe.
What’s to come
CANADA AND THE U.S. REPORT EMPLOYMENT DATA
- Both Canada and the U.S. will report September’s employment data on Friday. Canadian jobs data is expected to have cooled after an impressive first half of 2017, while in the U.S., we will see the extent to which hurricanes have hampered payrolls. The eurozone will report unemployment data, along with manufacturing updates from the U.S., the eurozone and Japan.
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