Canada’s Sales Are Disappointing in September · f Canada: September saw disappointing results for retail and wholesale trade. A LOOK AHEAD f A pullback in U.S. new home sales is
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WEEKLY NEWSLETTER
François Dupuis, Vice-President and Chief Economist Mathieu D’Anjou, Senior Economist • Benoit P. Durocher, Senior Economist • Francis Généreux, Senior Economist • Hendrix Vachon, Senior Economist
f As forecast, the leading indicator rose sharply in October. The 1.2% monthly gain, the strongest since December 2010, comes on the heels of a 0.1% increase in September (revised from -0.2%). The main positive contribution comes from the post-hurricane decrease in jobless claims. The ISM index, building permits, interest rates and consumer confidence also made positive contributions.
f Sales of existing homes increased 2.0% in October following September’s 0.4% gain and August’s 1.7% drop. This is the first time since fall 2016 that resales have recorded two monthly increases in a row. Annualized sales jumped from 5,370,000 to 5,480,000 units, the highest since June. All major areas saw higher sales. Single-family home and condo resales climbed 2.1% and 1.7%, respectively.
f New durable goods orders fell 1.2% in October, although the consensus expected a slight increase. The civil aviation sector dove 18.6%, adding to the 11.3% decline in military aviation. The auto sector, however, posted a gain of 1.7%. Excluding transportation, a 0.4% increase was observed in October. New capital goods orders, excluding defence and aviation, were down 0.5%, the first downward movement since June.
Francis Généreux, Senior economist
CANADA
f Retail sales rose just 0.1% in September, coming in well below expectations. On the one hand, the increase in service station sales was not as high as the steep rise in oil prices suggested. On the other hand, new car dealer sales slumped somewhat during the month, whereas preliminary data had shown a significant increase. In real terms, sales were down 0.6% in September.
f Wholesale sales slid 1.2% in September, while most forecasters expected them to be slightly up for the month. With the exception of automotive products and building materials and supplies, all other sectors saw a considerable drop in sales. In real terms, sales fell 1.1%. However, this decline is offset by a 0.7% gain in inventory volume.
Benoit P. Durocher, Senior economist
CANADA Retail trade has been hitting some bumps in recent months
Sources: Statistics Canada and Desjardins, Economic Studies
Financial MarketsThe Federal Reserve Remains Concerned About Weak Inflation
The week cut short by Thanksgiving in the United States was good for stock markets. The week had opened amid concerns in Europe that the impasse in Germany could trigger the need for new elections. However, reassuring political developments later in the week and positive economic data contributed to maintaining a positive mood. North American stock markets jumped during Tuesday’s session, driven by enthusiasm for tech stocks in particular. A new rise in oil prices and encouraging signs for holiday sales also boosted the stock markets. At the time of writing, the main North American indexes showed weekly gains of close to 1%.
Despite the generally upbeat mood, bond yields continued to decline with the 10-year yield dropping to about 2.32% temporarily. Comments from Federal Reserve (Fed) Chair Janet Yellen and the minutes of the last meeting signaling rising concerns about weak inflation boosted U.S. bonds. That said, a rate hike at the December meeting is still almost fully expected. Bond yields in Canada also fell, while weak wholesale and retail sales are another reason for the Bank of Canada to remain cautious.
The Feds’ minutes hurt the greenback on Wednesday, and its slight downtrend continued afterwards. The release of excellent data lifted the euro, which edged closer to US$1.19. Euroland’s PMI indexes pointed to sustained economic growth, which could encourage the European Central Bank to change its tone. The pound climbed back to US$1.33 and Japan’s exchange rate is again close to ¥111/US$. The loonie somewhat capitalized on oil’s price hike to US$58 a barrel and the slumping U.S. dollar. The Canadian dollar was trading at more than US$0.785 on Friday. Disappointing data on retail sales in Canada limited the loonie’s advance this week.
Mathieu D’Anjou, CFA, Senior economist
Hendrix Vachon, Senior economist
ECONOMIC STUDIES
4NOVEMBER 24, 2017 | WEEKLY NEWSLETTER
A Look Ahead
UNITED STATES
New home sales (October) – Rebounding by 18.9% in September, sales of new single-family homes reached their highest level since October 2007, a performance that is partially due to the post-hurricane thrust. A decline in sales is now expected for October. The level achieved one month earlier is difficult to sustain and similar surges seen in recent years were generally followed by immediate slumps. What’s more, while the level of building permits for single-family homes has been rising for the past two months, it points to lower sales. We expect sales to reach 630,000 units, which is still high.
S&P/Case-Shiller existing home price index (September) – Monthly growth in the price of homes accelerated in August, for the second straight month. The increase reached 0.5% after a 0.4% gain in July and a 0.1% uptick in June. We expect somewhat smaller monthly price growth in September; a 0.2% advance is anticipated. The annual change in the S&P/Case-Shiller index should edge up from 5.9% to 6.0%.
Conference Board consumer confidence index (November) – In October, the Conference Board index reached its highest level since December 2000. After gaining 5.3 points last month, some easing in November is expected. The University of Michigan index has in fact shed a few points during the month. Also noted was a slight dip in the weekly Bloomberg and Gallup indexes in recent weeks. Among some of the factors, rising gas prices should offset the stock market’s solid performance. All told, the Conference Board confidence index should slow to 123.0—still very high and encouraging as the holiday shopping season begins.
Consumer spending (October) – Real consumption in September showed the strongest mothy gain since March. The 0.6% advance was mostly due to the rebound in sales—especially automobiles—after the hurricanes. More modest growth is expected in October. Automobile sales declined slightly and retail sales posted fairly tepid growth. However, we expect real services to post good gains, based on energy output and data on food services. Real consumption probably advanced 0.2% in October. Nominal consumption should reach 0.3% if we add the 0.1% gain expected for the consumer expenditure deflator. Nominal personal income should also tick up by 0.3%.
ISM manufacturing index (November) – The ISM manufacturing index reached its highest level since May 2004 in September, but it lost 2.1 points in October. Another decline is expected for November—a signal that the main regional manufacturing indexes are sending. This index should reach 57.5, which is still high.
CANADA
Balance of payments – current account (Q3) – The total value of merchandise exports declined 7.9% in the third quarter. The value of merchandise imports also retreated for the period, but to a lesser extent—4.9%. In such conditions, a slight deterioration in the current account balance is expected for Q3.
MONDAY November 27 - 10:00October ann. rate Consensus 625,000 Desjardins 630,000September 667,000
Real GDP by industry (September) – The different economic results were fairly mixed in September. The volume of manufacturing sales advanced during the month, but their inventories were down. The opposite took place at wholesalers—sales volumes declined and inventories rose. At retailers, sales volumes declined by 0.6% in September. Nothing to cheer about here. Other data, however, allow for some optimism. For one, the number of hours worked was up 0.6% in September, with services up 0.8%. In the end, the change in real GDP by industry for September is expected to tick up 0.2%.
Real GDP (Q3) – The expected 0.2% increase in real GDP by industry for September, combined with the almost flat change in July and the 0.1% drop in August, mean that an annualized quarterly gain of 1.7% is expected for the third quarter as a whole. This marks a clear slowdown compared to the significant rises recorded in the first two quarters of 2017. Domestic demand should once again contribute to economic growth in the third quarter, but its support will largely be offset by the negative contribution arising from the trade balance deterioration. That Statistics Canada will undertake a historical revision of results as of 2014 is also worth noting.
Labour Force Survey (November) – After 35,300 new jobs were created in October, the labour market’s advance should slow somewhat in November to get back to a level that is more in line with the recent months’ trend. A slowdown could start to affect this trend, with economic growth losing steam in the last few months. In the end, about 10,000 new jobs are expected to be created in November. The unemployment rate could however tick down from 6.3% to 6.2%.
OVERSEAS
Euro zone: Economic indicators – Among the indicators to be released in the euro zone this week, several confidence indexes for November will be out on Wednesday. The flash version of the consumer confidence index is particularly encouraging, with the reading moving from -1.1 to +0.1, the highest level since January 2001. For its part, Euroland’s composite PMI index rebounded to a new peak in November, moving from 56.0 to 57.5. The advance estimate for November’s inflation will be released on Thursday. The annual change in the total consumer price index was 1.4% in October. The unemployment rate for October will also be out on Thursday; the rate was 8.9% in September.
Japan: Economic indicators – Several monthly indicators for October will be released this week in Japan. Retail sales will be made public Tuesday evening. Retail sales were up 0.8% in September. Industrial output and housing start data will be released Wednesday evening. The unemployment rate and the consumer price index will be published Thursday.
FRIDAY December 1st - 8:30Q3 2017 ann. rate Consensus 1.6% Desjardins 1.7%Q2 2017 4.5%
FRIDAY December 1st - 8:30November Consensus 10,000 Desjardins 10,000October 35,300
ECONOMIC STUDIES
6NOVEMBER 24, 2017 | WEEKLY NEWSLETTER
Economic IndicatorsWeek of November 27 to December 1st, 2017
Note: Desjardins, Economic Studies are involved every week in the Bloomberg survey for Canada and the United States. Approximately 15 economists are consulted for the Canadian survey and a hundred or so for the United States. Theabbreviations m/m, q/q and y/y correspond to monthly, quarterly and yearly variation respectively. Following the quarter, the abbreviations f, s and t correspond to first estimate, second estimate and third estimate respectively. The times shown are Eastern Standard Time (GMT - 5 hours). Forecast of Desjardins, Economic Studies of the Desjardins Group.
CANADA
Previous data Day Hour Indicator Period Consensus
UNITED STATES
MONDAY 27 --- ---
TUESDAY 28 8:30 Industrial product price index (m/m) Oct. n/a -0.2% -0.3% 8:30 Raw materials price index (m/m) Oct. n/a 2.0% -0.1%
FRIDAY 1 8:30 Net change in employment Nov. 10,000 10,000 35,000 8:30 Unemployment rate Nov. 6.3% 6.2% 6.3% 8:30 Real GDP by industry (m/m) Sept. 0.2% 0.2% -0.1% 8:30 Real GDP (ann. rate) Q3 1.6% 1.7% 4.5%
MONDAY 27 10:00 New home sales (ann. rate) Oct. 625,000 630,000 667,000 19:00 Speech of the New York Fed President, W. Dudley
WEDNESDAY 29 8:30 Real GDP (ann. rate) Q3s 3.2% 3.1% 3.0% 10:00 Pending home sales (m/m) Oct. 1.2% n/a 0.0% 10:00 Testimony of the Federal Reserve Chairman, J. Yellen, before a Committee of Congress 12:45 Speech of the San Francisco Fed President, J. Williams 14:00 Release of the Beige Book
THURSDAY 30 8:30 Initial unemployment claims Nov. 20-24 240,000 252,000 239,000 8:30 Personal income (m/m) Oct. 0.3% 0.3% 0.4% 8:30 Personal consumption expenditures (m/m) Oct. 0.3% 0.3% 1.0% 8:30 Personalconsumptionexpendituresdeflator Total (m/m) Oct. 0.1% 0.1% 0.4% Excluding food and energy (m/m) Oct. 0.2% 0.2% 0.1% Total (y/y) Oct. 1.5% 1.5% 1.6% Excluding food and energy (y/y) Oct. 1.4% 1.4% 1.3% 9:45 Chicago PMI index Nov. 62.3 59.0 66.2
FRIDAY 1 --- Total vehicle sales (ann. rate) Nov. 17,500,000 17,450,000 18,000,000 10:00 Construction spending (m/m) Oct. 0.5% 0.5% 0.3% 10:00 ISM manufacturing index Nov. 58.3 57.5 58.7
7NOVEMBER 24, 2017 | WEEKLY NEWSLETTER
ECONOMIC STUDIES
Economic IndicatorsWeek of November 27 to December 1st, 2017
Note: In contrast to the situation in Canada and the United States, disclosure of overseas economic fi gures is much more approximate. The day of publication is therefore shown for information purposes only. The abbreviations m/m, q/q and y/y correspond to monthly, quarterly and yearly variation respectively. The times shown are Eastern Standard Time (GMT - 5 hours).
Previous data m/m (q/q) y/y Country Hour Indicator Period
1 Statistic shows the level of the month of the column; 2 Statistic shows the variation since the reference month; * New statistic in comparison with last week.
1 Statistic shows the level of the month of the column; 2 Statistic shows the variation since the reference month; * New statistic in comparison with last week.
CRB: Commodity Research Bureau; WTI: West Texas Intermediate; ECB: European Central Bank; BoE: Bank of England; BoJ: Bank of JapanNote: Data taken at markets closing, with the exeption of the current day where they were taken at 11:00 a.m.
UNITED STATES, CANADA, OVERSEASMajor financial indicators