They’re baaack: U.S. consumers displayed their shopping savvy in October
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They’re baaack: U.S. consumers displayed their shopping savvy in October

Author: The editor's desk

November 19, 2018

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

  • U.S. consumer prices increased by the most in nine months in October amid gains in the cost of gasoline and rents, pointing to steadily rising inflation. The Labor Department reported its Consumer Price Index rose 0.3% last month, the biggest gain since January, after edging up 0.1% in September. In the 12 months through October, the CPI increased 2.5%, picking up from September’s 2.3% rise. Excluding the volatile food and energy components, the CPI climbed 0.2%. The so-called core CPI had gained 0.1 per cent for two straight months. In the 12 months through October, the core CPI increased 2.1 per cent after advancing 2.2 per cent in September.
  • Retail sales rose 0.8% in October after dipping 0.1% the prior month (downwardly revised from a 0.1% increase). Sales of motor vehicles and parts jumped 1.1%. Excluding this category, consumer outlays increased 0.7% thanks in part to a sharp increase in spending at gasoline stations (+3.5%, the steepest gain in nearly a year). Sales of building materials (+1.0%), electronics (+0.7%), and miscellaneous items (+0.6% )also came in strong. In all, spending increased in no fewer than 10 of the 13 segments surveyed.

Canada home sales slip for second consecutive month, while BoC report shows new mortgage holders less indebted

  • 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%). These increases were more than enough to offset decreases in shipments of machinery (-6.2%), wood products (-2.9%) and electrical equipment (-3.0%). With the price effect removed, total factory sales declined 0.1% on a monthly basis, while inventories rose 0.2%. As a result, the real inventory-to-sales ratio stayed still at 1.43.
  • Canadian home sales fell for a second month in a row in October, as sold prices and the number of new listings also dropped, signs the national real estate market remains is in more balanced territory. The Canadian Real Estate Association said last week that home sales across the country through its Multiple Listing Service system dropped by 1.6% in October compared with September as the number of transactions fell in more than half of all local markets including Montreal, Edmonton and the Hamilton-Burlington, Ont., area. Excluding the Greater Toronto Area and the Greater Vancouver area, two of the country’s most expensive and active markets, the average price of a sold home was just under $383,000.
  • There’s been a dramatic drop in the number of new, highly-indebted borrowers in Canada driven due to higher interest rates and tougher mortgage qualification rules, the Bank of Canada said last week. The share of new mortgages going to highly-indebted borrowers – those with loan to income ratios of above 450%– dropped to 13% in the second quarter of this year, down from more than 18% last year, the Bank said.
  • Ontario has carved its deficit down to $14.5 billion, a reduction of $500 million since the Progressive Conservative government took office in June. Ontario Finance Minister Vic Fedeli said that while the province has saved an additional $3.2 billion in program expenses by reducing spending, including cancelling planned tax increases and the previous Liberal government’s cap-and-trade program. However, the government also revealed that cancelling cap and trade cost Ontario $1.5-billion in lost revenues during the current fiscal year, and the fiscal watchdog has said it would lead to a loss of $3-billion in revenue over four years.

IMF cuts growth forecast for a number of major economies while cyber security threats loom large in leaders’ minds

  • The IMF is forecasting that global growth for 2018-2019 will remain steady at its 2017 level of 3.7%, but the growth outlook for a number of major economies have been reduced. In the United States, while the real GDP growth outlook for 2018 is unchanged at 2.9%, the forecast for 2019 has been revised down to 2.5% due to the trade war between the U.S. and China. The IMF also blamed the recent trade tensions between the two countries for projected declining growth in China, which it now sees at 6.2% in 2019, off from 6.6% in 2018 and 6.9% in 2017. Overall, the IMF said the outlook for many emerging and developing economies is weaker, reflecting downward revisions for some large emerging market economies due to country-specific factors, tighter financial conditions, geopolitical tensions and higher oil prices, according to the report. However, the IMF expressed optimism for the Middle East, despite a recent slide in oil prices.
  • Cyber security, energy price shocks and the failure of national governance are among the biggest threats to business in 2018, according to a new report from the World Economic Forum. WEF researchers found there were significant variations in risk perceptions between world regions. For example, cyber-attacks were considered the number one risk by executives in Europe and advanced economies, while failure of national governance was the top concern for their Latin American counterparts. The study also revealed that worries about technological risk is on the rise, with cyber-attacks named as the top concern for executives in three of the eight regions covered. In the 2016 survey, only one region— North America — named cyber-attacks as the biggest threat to business. In energy-rich regions Eurasia, the Middle East and North Africa, energy price shocks were ranked as the top risk to business.
  • Hong Kong housing prices could fall 25% next year if the trade war between the United States and China worsens, real-estate and investment management company JLL warned last week. The forecast is the latest bearish call for what is traditionally one of the world’s most expensive real-estate markets. The market is entering a “correction phase” and prices have the potential to decline further, JLL said last week. The baseline forecast is for a 15% fall in 2019, but a 25% drop in prices is possible if the trade war heats up further and stock prices continue to decline, it added.

What’s to come

Canada’s CPI numbers, U.S. housing starts and PMI data

In Canada, market watchers will be looking for October’s consumer price index figures, Meanwhile, in the U.S., new housing starts and PMI data will be released.

 

Download the Summary

Source: BMO Economics, TD Economics, Reuters, CNBC as of November 16, 2018

 

 

 

Source: Bloomberg, as of November 16, 2018

 

Commentaries contained herein are provided as a general source of information based on information available as of November 16, 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 19, 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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