The third quarter GDP reports an economy with stronger growth than expected. Out partners at National Bank Financial Economics offers a thorough analysis that reveals many aspects of our economy remain robust, including: domestic demand fired on all cylinders, consumer demands remains strong, household savings rates increase and inventories continue to be drawn down. Job growth has even outpaced economic growth to this point. These indicators paint a positive picture for 2020 with modest growth projected but recent November 2019 jobs numbers propose a ‘significant fly in the ointment’.
November 2019 Canadian Job Numbers Tumble
Just when it appeared we expected to enter 2020 on a modestly positive keel, the winds of change appear in the November jobs report. The chart below offers a longer term perspective on the recent increase in unemployment. Coupled with the Bank of Canada leaving overnight rates unchanged at 1.75%, the Bank of Canada focused on the resilience of the Canadian economy in their most recent statement.
Trade Wars may be a negotiating strategy but if sustained they will become a global ‘wet blanket’ that no economy will escape. As our partners at NBF Economics, point out in their recent economic outlook, China’s slowdown is significant. This is the ‘Yin”. A significant Chinese economic slowdown could hit Canada hard and cause a decline in the U.S.
“In China, GDP expanded just 6.2% in Q2 from a year earlier (+1.6% q/q non-annualized). Its slowest pace since data collection began in 1992. Although in line with expectations, this result confirmed that the world’s second largest economy is slowing amid persistent U.S. trade tensions. The deceleration could have been worse had other indicators not surprised on the upside in June.”
NBF Economics July 2019
“Global trade contracted 2.3% between October and April, according to the Netherlands Bureau of Economic Analysis. The World Bank expects the global economy to grow by just 2.6% this year—the weakest pace since the financial crisis.”
Great news for the Canadian economy as a record number of full-time jobs was declared in April 2019 with 107,000 added. Our partners at National Bank Financial, Economics offers a balanced view of this one month surge.
Canadians, whether borrowers, lenders or savers have been attuned to rising interest rates in 2018. Rates are on the rise and where they go depends upon external forces such as exchange rates with trading partners and equity markets.
The Canadian economy had a solid month with positive employment figures, settlement of the US NAFTA 2.0 (USMC agreement) and the large liquid natural gas (LNG) project announcement. Looking forward, our partners at National Bank Financial (NBF) Economics offer investors insights on pace and and timing of interest rates which include:
The Bank of Canada (BoC), as widely expected, raised the overnight rate 25 bps to 1.75% on October 24, 2018
NBF continues to see the Bank (BoC) taking a long pause at 2.5% bank rate
NBF outlook for 10-year U.S. Treasuries is trading around 3.50% and 10-year Canadas around 3.10%, a year from now in October 2019
NBF sees the Canadian central bank overnight rate at 2.5% and the upper bound of the target fed funds range at 3.0% at year-end 2019
Enjoy a detailed outlook for Canadian, US and Global Fixed Income Markets from our partners at NBF Economics HERE.