It just keeps on going, and going, and going: U.S. Q3 GDP surges ahead
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It just keeps on going, and going, and going: U.S. Q3 GDP surges ahead

Author: The editor's desk

October 29, 2018

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

U.S. GDP growth rate surges, durable goods orders slow

  • The U.S. economy grew at a faster-than-expected rate in the third quarter as inflation was kept in check and consumer spending surged, according to data released last week by the U.S. Commerce Department. Gross domestic product expanded by a 3.5% annual rate, a slight uptick from an expected 3.4% annual rate. The 3.5% gain marked a slowdown from the 4.2% pace in the second quarter. Strong consumer and government spending helped to bolster the economy. But lower exports weighed on growth after a surge earlier in the year as firms rushed shipments to beat tariffs. The department said the PCE price index, a key measure of inflation, increased by 1.6 % last quarter, less than the 2.2% increase according to estimates.
  • Orders to U.S. factories for big-ticket manufactured goods slowed significantly in September. Demand for durable goods edged up 0.8% in September, a sharp slowdown from a 4.6% jump in August, the Commerce Department said last week. The swing was heavily influenced by the volatile aircraft category, which fell 17.5% in September after having surged 63.7% in August. Overall, transportation orders were up 1.9%. Excluding transportation orders, durable goods were up a tiny 0.1% after a 0.3% gain in August. Orders for machinery increased 0.8% while demand for primary metals such as steel rose 0.1%. Demand for computers fell 0.4% while orders for communication equipment slipped 0.1%.

BoC hikes rates, CMHC warns housing market ‘’highly vulnerable”

  • The Bank of Canada pressed ahead with an interest rate increase and acknowledged for the first time in more than a decade it expects to completely remove monetary stimulus from the economy. Canada’s central bank raised its overnight benchmark rate by a quarter point to 1.75% last week, the third hike this year and fifth since it began tightening in 2017. More importantly, it dropped references to taking a “gradual approach” and added language about the need to bring rates to levels that are “neutral,” or no longer expansionary.
  • Federal finances remain in surplus five months into the fiscal year, even though the most recent budget projected an $18.1-billion deficit. The latest monthly fiscal monitor report from the Finance Department shows Ottawa ran a $1.9-billion deficit in August, but remains in the black for the fiscal year that started April 1. The $2.6-billion surplus for the year so far represents an improvement over the $2.9-billion deficit that had accumulated over the same five-month period one year earlier.
  • The Canadian Mortgage and Housing Corporation warned the Canadian housing market remains “highly vulnerable” despite an easing in prices. In its fourth-quarter assessment, the federal agency said house prices in Toronto, Vancouver, Victoria and Hamilton are starting to line up more closely with housing market fundamentals such as income, mortgage rates and population. It said Montreal’s resale market is ‘’close to overheating, while there continues to be overbuilding in Edmonton, Calgary, Saskatoon, Winnipeg and Regina.
  • Canadian small business confidence, as measured by the Canadian Federation of Independent’s Business Barometer, fell in October, posting a 0.9 point decline to reach 60.5. This marks a second consecutive monthly decline, but still leaves the index above its year-ago levels and puts it in line with recent trends.

China/Japan sign 500 business deals, Eurozone finance ministers meet over Italy’s budget

  • Leaders of China and Japan announced last week they have agreed to boost economic cooperation and not to pose a threat to each other at a joint press conference Friday. The two countries announced they have signed over 500 business deals. Those agreements included reviving a currency-swap deal dropped in 2013, while Li also called for an early conclusion to an Asia-Pacific nations’ trade pact that includes 16 countries but not the United States.
  • Euro zone finance ministers will discuss Italy’s 2019 draft budget at their next meeting, on Nov. 5, despite Italian requests to postpone the talks. Yields on Italy’s bonds have spiked since September, when the Italian Eurosceptic government disclosed details of a free-spending budget that would breach EU fiscal rules and could increase the country’s large debt.

What’s to come

Canada’s GDP numbers, interest rate decision, and a slew of U.S. data

Canada’s August GDP numbers will be released this week, along with October’s labour force survey numbers. In the U.S., markets will be closely watching the establishment survey, as well as factory orders and construction spending.

Download the summary


Source: BMO Economics, TD Economics, Reuters, Globe and Mail, CNBC as of October 26, 2018

About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

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