Japan ends its streak of economic growth

Author: Portfolio Specialist Group

May 22, 2018

AGF Weekly Perspectives

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

Canada inflation, retail sales

  • Consumer prices were up 2.2% year-on-year in Canada in April, down from 2.3% in March and below the consensus call for 2.3%. Adjusted for seasonal patterns, prices rose 0.1% month-on-month.
  • The biggest (seasonally adjusted) month-on-month gainers were clothing & shoes (+1.2%), alcohol and tobacco (+1.0%), and household operations (+0.7%). Recreation and education prices fell 1.5%, health and personal care prices were down 0.5%, and transportation prices edged lower by 0.2%.
  • In a separate report, Canadian retail sales advanced a 0.6% (m/m) in April, a touch higher than March’s slightly upwardly revised 0.5% gain. The increase was entirely due to volumes, which rose 0.8% during the month.

Japanese economy slows

  • After eight consecutive quarters of economic growth, Japanese GDP declined in the first quarter of 2018, falling 0.2%.
  • A pullback in housing and capital investment caused the decline, snapping the country’s longest streak of expansion in nearly three decades. Consumer spending was flat, while next exports were slightly positive in the quarter.
  • Also reported, Japanese core consumer price index continues to slow, rising 0.7% in April or slightly less than the 0.9% iin March.

U.S. housing starts pause, but remain strong

  • U.S. housing starts fell 3.7% in April to a four-month low, though the decline was entirely due to an 11.3% pullback in multi-unit starts, which decelerated after surging in the prior month.
  • Despite the disappointing report, the 12-month rolling average for U.S. housing starts remains at the highest level since March 2008.
  • Building permits also declined in April, falling 1.8%, though remain at levels above housing starts, which points to continued strength in the months ahead.

Other economic news

  • U.S. retail sales rose 0.3% in April, on top of a strong upward revision in March to 0.8% growth. Gas station receipts and building material sales were strong, up 0.8% and 0.4% respectively, while restaurants and bars reported negative growth for the firs ttime in seven months. On an annualized basis, U.S. retail sales have grown 4.7%.
  • U.S. industrial production rose 0.7% in April, and 3.5% year over year, with broad based growth across utilities and mining. China’s industrial production rose at a 7.0% annualized pace, while the eurozone recorded its first gain in three months with production increasing 0.5% in March, to a 3.0% annualized pace.

What’s to come

U.K. GDP growth and U.S. housing

  • U.K. economic growth and inflation data will be reported during the week. In the U.S., new and existing home sales for April will be released.

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Written by

Portfolio Specialist Group

AGF Investments Inc.

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