Canadian economic data falters

Author: Portfolio Specialist Group

June 11, 2018

AGF Weekly Perspectives

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

Canada’s labour market misses expectations

  • The Canadian labour market lost 7,500 jobs in May, widely missing expectations and below the 12-month average of 20,000. A loss of 31,000 full-time positions more than offset a 23,600 gain in part-time work. Regionally, British Columbia was worst off with 12,400 net positions lost. Across Canada, six of 10 provinces reported employment growth.
  • Goods-producing sectors weighed negatively with losses in manufacturing and construction. Positively, service-sector positions remain strong, with 21,500 jobs added in May.
  • Canada’s unemployment rate held at 5.8%, in part due to a dip in the participation rate, while average hourly wages reached a nine-year high with a 3.9% annualized pace of growth.

Canadian housing starts slip

  • Canadian housing starts fell 9.8% in May, though the 12-month average remains close to 2008 highs. Urban multi-family starts drove the loss, down 16% in the month, after facing government zoning restrictions, rising material costs and higher mortgage rates impacting affordability.
  • Regionally, Alberta was the lone positive in the month, as most other regions reported flat or declining housing starts. Quebec and Ontario suffered their worst respective months of activity in a year.
  • Between Canada’s hottest markets, Toronto starts fell 13% in May, while Vancouver rose 14%.

U.S. non-manufacturing index reaches milestone

  • The U.S. ISM Non-Manufacturing Index rose to 58.6 after recording a strong 1.8 gain in May, and marks the 100th consecutive month of expansion (levels above 50.0).
  • New orders and business activity led, as 14 of 18 non-manufacturing industries reported growth.
  • The majority of respondents showed optimism around business conditions and the strength of the economy, though did raise concerns over trade and the potential impacts of higher supply-side costs.

Other economic news

  • Eurozone retail sales were muted in April with a 0.1% gain. Increased spending on clothing and computer products were offset by declines in food, drink and tobacco products. On an annualized basis, eurozone retail sales are 1.7% higher from a year ago.
  • German industrial production unexpectedly fell 1.0% in April, as manufacturing orders have declined for four straight months. Partially offsetting the loss, March’s production was revised upward to 1.7%, from 1.0%. Industrial production in France also missed expectations for a slight gain, instead falling 0.5% in April.

What’s to come

Another Fed rate hike?

  • The U.S. Federal Reserve (Fed) meets on Wednesday with another 25% rate hike widely expected. U.S. inflation and retail sales data will also be reported during the week. The European Central Bank meets on Thursday, though no policy changes are expected.

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