Insights and Market Perspectives

Trump exits Iran nuclear deal & other economic news

Author: Portfolio Specialist Group

May 14, 2018

AGF Weekly Perspectives

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

Trump exits Iran nuclear deal

  • President Donald Trump announced the U.S. will withdraw from the Iran nuclear deal, describing the agreement as a “horrible, one-sided deal” that used funding to cause terror in the Middle East.
  • Effective immediately, the U.S. restored all sanctions on Iran that were previously suspended as part of the deal. The announcement disrupted oil markets, which experienced volatile price swings during the week.
  • In a separate speech during the week, President Trump unveiled his long-awaited “American Patients First” plan for lowering prescription drug prices. Trump called for “eliminating the middle-man” to achieve increased competition, though did not offer specific plans in his comments.

U.S. inflation inches higher

  • U.S. inflation rose 0.2% in April, slightly missing expectations though strong enough to raise annualized levels to 2.5%.
  • Gasoline prices rebounded 3.0% after a sharp decline in the prior month and food prices recorded their largest monthly increase in a year, up 0.3% in April. Lower airfare costs held down inflation with a 2.7% decline in the month and down 6.9% from a year ago.
  • Outside of volatile items, core inflation rose 0.1% in April and held unchanged at 2.1% year over year.

Canada’s labour market holds strong

  • The Canadian labour market lost a net 1,100 jobs in April following a strong advance in the prior month. Positively, the decline was due to a loss of part-time positions (down 2.8% annualized), with 28,800 full-time positions added (up 2.6% annualized). A decline in construction, retail and wholesale trade positions more than offset a positive month in service sectors including professional and technical jobs.
  • Canada’s unemployment rate remained at four-decade lows of 5.8%, as British Columbia leads the country with only 5.0% unemployed.
  • Tight labour conditions have supported higher wages, with average hourly earnings reaching 3.6% annualized growth and close to cycle highs.

Other economic news

  • Canadian housing starts paused in April, down 4.9% from the prior month, though the longer-term trend remains strong. Single-detached starts fell 9.6%, while condos declined 2.6%. Ontario and British Columbia were amongst the provinces reporting reduced activity in April, while Quebec starts rose to near cycle highs. Also reported, Canadian building permits rose 3.1% in March, led by multi-family plans in Quebec and British Columbia.
  • The Bank of England held key policy rates unchanged after coming off hawkish comments made earlier in the quarter. Recent disappointing data influenced the central bank’s decision, though tone remained positive and risks of Brexit escalation were removed from official comments.

What’s to come

Japan’s growth streak may come to an end

  • Canadian inflation and retail sales are set to be reported Friday. The eurozone is also scheduled to release April’s inflation data during the week, while Japan’s two-year streak of economic growth may come to an end with first quarter GDP reported on Tuesday.

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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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