In light of the converging Canadian and U.S. long weekends due to national birthday parties, we have summarized a strong economic start to the summer below.
Internationally, despite the negative headlines overall growth is solid:
- The global economy is picking up steam buoyed by both advanced and emerging economies. We expect global GDP growth to be close to 3.5% both this year and next. That, however, assumes policymakers are able to minimize downside risks such as mounting trade protectionism, elevated debt levels and the impacts of Brexit.
United States economy readies for more potential rate hikes due to strong job growth:
- The improving U.S. economy explains the Fed’s decision at its June meeting to upgrade slightly its growth forecasts and tighten monetary policy further. Industrial output and real consumption spending are on track to grow in the second quarter at a much faster pace than in Q1 and the labour market remains rock solid. But while we remain comfortable with our view that U.S. GDP growth will accelerate to more than 2% both this year and next. That’s not to say we share the Fed’s optimism on inflation and hence interest rates for 2018 and 2019.
Canadian economic data has largely surprised on the upside this year:
- Growth has been strong and so has the labour market, the latter creating jobs in numbers not seen since 2013. The housing market has surged as a result. So much so that the Bank of Canada signalled an upcoming policy change. Dovish rhetoric has been replaced with an explicit statement that it is now assessing whether the current considerable stimulus is still required. We have brought forward by one quarter to October 2017, the timing for an increase in the overnight rate.
- Statistics Canada ends this week by issuing its labour force survey for the month of June. Last month, the agency’s report for May showed a surprisingly strong 54,500 net new jobs — including 77,000 full−time positions.