Sharp increase in Canadian firms applying for bankruptcy, inflation climbs
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Sharp increase in Canadian firms applying for bankruptcy, inflation climbs

Author: The editor's desk

November 26, 2018

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

  • Insolvencies among Canadian corporations climbed 4.6% in the third quarter, the sharpest increase in at least six years, a sign higher borrowing costs may be taking a toll on businesses. Some 826 companies filed for insolvency in the three months through September, compared with 790 in the same period a year earlier, the Office of the Superintendent of Bankruptcies said last week. Quebec, Alberta and Manitoba saw the biggest increases. By sector, retail trade, transportation, construction and manufacturing were among the hardest hit. Insolvencies jumped 17.5% in September, the last month of the quarter.
  • Ottawa’s long-awaited plan to help Canada compete with the United States for investment dollars is the centerpiece of its latest fall economic statement, which forecasts slightly deeper annual deficits over the coming years. Canadian Finance Minister Bill Morneau had faced pressure from the business community to take the big step of lowering the corporate tax rate across the board as his response to major tax and regulatory reforms in the U.S. In Wednesday’s economic update, Morneau chose a cheaper approach — but one that will still use billions worth of extra federal fiscal space to offer tax incentives for businesses that invest in Canada.
  • Canadian inflation accelerated slightly in October on the back of higher costs for cars, but underlying price pressures remained around the central bank’s target. The consumer price index recorded a faster-than-expected annual pace of 2.4% during the month, up from 2.2% in September, Statistics Canada reported last week.
  • The value of Canadian retail trade rose by 0.2% in September from August, in part due to higher sales at food stores as well as auto dealers, Statistics Canada reported last week. Analysts were forecasting a gain of 0.1%. Stripping out the effect of price changes, volumes increased by 0.5%. Sales rose in six of 11 subsectors, representing 75% of total retail trade. Receipts at food and beverage stores rose by 0.9%, pushed up by a 1.7% increase in sales at supermarkets and other grocery stores. Sales at beer, wine and liquor stores fell by 1.7%. Sales at gas stations dipped by 1.1%, the third decline in four months, partly reflecting lower prices. Sales at motor vehicles and parts dealers rose by 0.5%.

Forget the turkey: U.S. consumers spend Thanksgiving online shopping

  • Sales online for Thanksgiving Day totaled $3.7 billion, up 28% from a year ago, according to Adobe Analytics. That makes Thursday the fastest-growing day for e-commerce sales in history, added the firm, which tracks transactions from 80 of the top 100 internet retailers. Thursday was also the first day in 2018 to see $1 billion in sales from smartphones, according to Adobe, with shoppers spending 8% more online on Thursday compared with a year ago. Meanwhile, Amazon reported ‘’record levels” of U.K. shopping as Black Friday takes off internationally.
  • Meanwhile, the seasonally adjusted IHS Markit Flash U.S. Manufacturing Purchasing Managers’ Index has come in lower than expected with a reading of 55.4 compared to the predicted level of 55.7. This marks a three-month low for the index which is used as a measure of the general health of the manufacturing industry. IIHS Markit states that growth in November has been robust despite the moderate slowdown. The drop is attributed to limited production growth and a comparatively slow rate of inventory accumulation during November. Capacity constraints and stretched supply chains reportedly held back progress according to several of the survey respondents.

Trade disputes, rising rates to dampen global growth

  • Amid prolonged trade disputes and rising interest rates, the global economy will continue to slow down next year, according to the latest forecasts from the Organization for Economic Cooperation and Development. But the Paris-based group doesn’t see a recession on the horizon. Global growth will slow from an estimated 3.7% this year to 3.5% in 2019 and 2020, down from a previous forecast of 3.7% for 2019. The slowdown is expected to hit hardest in developing economies, as rising interest rates dampen investment in countries like Brazil, Russia, Turkey and South Africa. Manufacturing shipments rose 0.2% in September following a 0.5% decline in August. Sales were up in eight of the 21 broad categories, including transportation equipment (+3.1%), chemicals (+1.4%) and petroleum/coal products (+0.9%).

What’s to come

Canada’s GDP numbers , U.S. housing figures

In Canada, market watchers will be looking for third-quarter GDP numbers. In the U.S., both pending and new home sales will be released.

 

Source: BMO Economics, TD Economics, Reuters, CNBC as of November 23, 2018

 

Download the summary

 

Source: Bloomberg, as of November 23, 2018

 

 

Commentaries contained herein are provided as a general source of information based on information available as of November 23, 2018 and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and the manager accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein.

 

Published Date: November 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.

For further information, please visit AGF.com.

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