Market Focus Canadian economy stumbles The latest figures from Statistics Canada revealed quarterly GDP growth of 1.7% (annualized) in the second quarter. While this was down from the revised 2.2% pace (originally reported as 2.5%) seen in the first quarter, analysts had been bracing for weaker results. However, a breakdown of the underlying monthly figures did show some disturbing results. After five consecutive months of gains, GDP actually contracted by 0.5% in June. This resulted in a very modest 0.9% advance on a year-over-year basis. These two figures are the weakest since the end of the recession in 2009. Three consecutive declines in the goods-producing sector were largely responsible, as both manufacturing (-3.1%) and construction (-0.8%) have now posted losses compared to the same period in 2012. U.S. shows better growth Updated information from the U.S. Bureau of Economic analysis revealed that the nation’s GDP grew at a surprising 2.5% (annualized) pace in the second quarter of 2013. This was well above the 1.7% pace previously announced for the quarter and the 1.1% rate that prevailed in the first quarter of the year. The upward revisions primarily reflected upward changes to international trade results and inventory investments. These changes were partially offset by increased cuts to government spending. Nevertheless, the data suggest that the broader economy managed through the introduction of higher taxes and lower government spending. Evidence of more robust economic activity raises the probability that the Federal Reserve’s “tapering” of its quantitative easing program will occur sooner rather than later. Oil soars on Syria worries The price of crude oil jumped on heightened concern over the possibility of military intervention in Syria. Benchmark prices for West Texas Intermediate (WTI) briefly broke through US$112 per barrel in heavy trading as the increased likelihood of a significant supply disruption in the Middle East prompted speculative buying activity. The move up represented the highest price since May 2, 2011 as the commodity capped a 15% advance over the past three months. Still, despite higher gasoline prices, WTI is well below its all-time high price of US$145.29 posted on July 3, 2008. Longer View With interest rates at historic lows and government stimulus efforts keeping rates low, we believe inflationary pressures will eventually emerge, resulting in higher interest rates down the road. Investing in equities is one of the best ways to stay ahead of inflation. Having a professional advisor who can provide a diversified portfolio that takes into consideration your risk tolerance can help protect your investment returns from inflation. Market Board – Weekly Summary August 26 ▼ The U.S. Census Bureau announced that durable goods orders decreased 7.3% in July. Excluding transportation, new orders decreased 0.6%. Excluding defence, new orders decreased 6.7%. These figures are weaker than market expectations. Orders for durable goods indicate how busy manufacturers will be in the months to come, as they work to fill those orders. August 27 ▲ The U.S. Conference Board announced that its consumer confidence index increased slightly in August. The index now stands at 81.5, up from a revised 81.0 in July (originally reported as 80.3). The Present Situation sub-index decreased to 70.7 from 73.6. The Expectations sub-index increased to 88.7 from 86.0 last month. With the upward revisions, these results are stronger than expectations. Consumer confidence is an indicator of spending patterns. August 28 ▲ Statistics Canada reported that average weekly earnings rose 0.3% to $918.67 in June, augmenting the upwardly revised 1.2% advance in May. On a year-over-year basis, average weekly earnings rose 2.6%. With the revision, these results are stronger than expectations. As this indicator measures growth in income, it can reveal trends in consumer spending. August 29 ▲ The U.S. Bureau of Economic Analysis announced that real gross domestic product (GDP) grew at an annual rate of 2.5% in the second quarter of 2013. The original growth estimate was 1.7%. In the first quarter, real GDP increased 1.1% on the same basis. These results are stronger than expected as the market was looking for a more modest upward revision. GDP is the broadest measure of aggregate economic activity and encompasses every sector of the economy. ▼ The U.S. Department of Labor announced that initial jobless claims totalled 331,000 (seasonally adjusted) in the week ending August 24, a decrease of 6,000 from the previous week’s revised figure of 337,000 (previously reported as 336,000). The four-week moving average was 331,250, an increase of 750 from the previous week’s unrevised average of 330,500. These results are in line with market consensus. ▲ Statistics Canada reported that Canada’s overall current account deficit increased $1.1 billion to $14.6 billion in the second quarter. This change was largely reflected in the trade balance, led by a higher deficit on trade in goods. The increase in the deficit was larger than anticipated. Current account deficits must be funded by borrowing from foreign lenders. ▲ Statistics Canada reported that its Industrial Product Price Index (IPPI) rose 0.3% in July while its Raw Materials Price Index (RMPI) rose 4.2%. On a year-over-year basis, the indices are up 1.4% and 7.6%, respectively. Higher prices for motor vehicles and energy products were seen during the month. These figures are higher than expectations. The IPPI and RMPI data are closely watched as they indicate relative inflationary pressures at the industry and raw materials levels. August 30 ▲ Statistics Canada announced that real gross domestic product (GDP) advanced 1.7% (annualized) in the second quarter, after gaining a downwardly revised 2.2% in the first quarter. Weaker international trade results and a winding down of inventory positions were behind the slowdown. On a monthly basis, real GDP by industry decreased 0.5% in June after five consecutive monthly gains. These results are in line with expectations. GDP is the broadest measure of aggregate economic activity and encompasses every sector of the economy. ▲ According to the U.S. Bureau of Economic Analysis, personal income increased 0.1% in July. Personal consumption expenditures (PCE) also increased 0.1%. Based on revised figures, personal income increased 0.3% and PCE increased 0.6% in June. Both income and expenditure figures were weaker than expectations. Income and spending patterns of consumers are critical factors in the health of the broader economy. Although the above information has been compiled from sources believed to be reliable, as at the date indicated, we cannot guarantee its accuracy or completeness. The information is provided solely for informational and educational purposes and is not to be construed as advice in respect of securities or as to the investing in or buying or selling of securities, whether express or implied. All data provided is subject to change without notice. The authors of this publication are employed by CI Investments Inc. or its affiliates. CI Investments and the CI Investments design are registered trademarks of CI Investments Inc. Neither CI Investments Inc. nor any of its affiliates or their respective officers, directors, employees or advisors is responsible in any way for damages or losses of any kind whatsoever in respect of the use of this information. © 2013 CI Investments Inc.
Posted on: Mon, 02 Sep 2013 12:33:55 +0000
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