Insights and Market Perspectives

Trade tensions intensify with both China and Canada

Author: Portfolio Specialist Group

September 24, 2018

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

Trade tensions intensify with both China and Canada

  • The U.S. is sharply escalating the trade war with China imposing a 10% tariff later this month on $200 billion worth of Chinese goods, increasing to 25% at the end of the year. All told, it means roughly half of the products that China sells to the United States each year will be hit by American tariffs.
  • The U.S. also imposed sanctions against China’s military for its purchases of Russian military equipment in a move U.S. officials said is meant to punish Moscow for its ‘’malign activities,” including attacks on American elections.
  • Some members of the Republican caucus warned last week that Canada had better make concessions to get a NAFTA deal. Meanwhile, Canadian Foreign Affairs Minister Chrystia Freeland left Washington Thursday ahead of a looming congressional deadline deal with no conclusion in sight and no firm plans for the next meeting reiterating the need for a “fair deal” for Canada.
  • The Conference Board of Canada is predicting Canada’s economic growth could be pared by about a quarter next year if NAFTA collapses, and the drag will be extended if an automobile trade war emerges.

Canadian manufacturing sales, consumer prices and new housing construction all rise

  • Canadian manufacturing sales posted a 0.9% increase in July, following last month’s upwardly revised 1.3%. After accounting for price changes, volumes were up an even more impressive 1%. Gains of 2.6% in the transportation equipment sector, slightly offset declines in primary and fabricated metal product shipments. Regionally, only Ontario, Alberta and Nova Scotia saw gains.
  • Consumer prices rose 2.8% n August, a slight deceleration from the 3% posted in July but in line with market expectations. Adjusted for seasonal patterns, prices rose 0.1%, following a large increase of 0.5% iin July.
  • New housing construction increased 1.7% year-over-year to $5.0 billion in July. The growth was driven solely by investment in apartment building construction, while construction of single, double and row houses all slumped. Spending was up in four provinces, led by Quebec. BC amd to a lesser extent Nova Scotia and PEI.

US Consumer confidence soars, while jobless claims sink to lowest level in 49 years

  • U.S. consumer sentiment measured by the Bloomberg Consumer Comfort Index last week advanced to a 17-year high on brighter views of the economy, personal finances and the buying climate, The comfort index rose to 60.2, its highest level since January 2001 when it was 59.
  • Weekly jobless claims fell to their lowest level in nearly 49 years last week, totaling 201,000, according to the Labor Department. Economists had forecast claims to come in at 210,000.

Other economic news

  • The OECD has trimmed both its global economic outlook and Canada’s amid trade disputes and emerging market woes. It said the world economy is on course for growth of 3.7 per cent this year and next, up from 3.6 per cent last year. However, the Paris-based policy forum had forecast growth of 3.8 percent this year and 3.9 percent in 2019. The updated projection now sees Canada’s economy expanding by 2 per cent in 2019, rather than the 2.2 per cent it forecast earlier.
  • The S&P Dow Jones has reorganized its Indices with several sectors relaunching, including its telecommunications index as a new communication services sector. The reorganization is expected to involve some S&P 500 heavyweights like Facebook Inc., Amazon.com Inc., Netflix Inc. as well as Google parent Alphabet Inc.

What’s to come

Bank of Canada Governor speaks and U.S. Federal Reserve meets

Bank of Canada Governor Stephen Poloz speaks at the Atlantic Provinces Economic Council and Greater Moncton Chamber of Commerce Thursday. In the U.S., the Federal Reserve Bank meets Wednesday and is expected to raise rates.

Source: BMO Economics, TD Economics, Reuters, CNBC as of September 21, 2018

Download the Summary

Source: Bloomberg, as of September 21, 2018

 

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