“By just looking at soaring stock markets you wouldn’t know the world economy is on track to grow this year at the slowest pace in a decade…as the MSCI All-Country World index soared to all-time highs in November amid investor confidence about de-escalation of the U.S.-China trade war.“
2020 begins with geopolitical fireworks in escalating tensions between Iran and the U.S. Oil prices shoot upwards of 4% or more. It is easy to forget that Brexit looms while the first phase of China-U.S. trade signals a deescalation in tensions.
GDP prospects for Canada in 2020 are forecasted to be similar to 2019. National Bank Financial Economics with an above-consensus call of 1.8% for 2020 real GDP growth. They assume some fiscal stimulus from the federal government. Barring a significant deterioration in the global economic outlook, National Bank Financial continues to expect the central bank to refrain from cutting interest rates over the near to medium term.
Inflation is the thermometer of economic activity in Canada, which is heating up. Our partners at NBF Economics point out that inflation is rising in Canada led by food prices. These particularly impacts retirees and working families the hardest as they have rising expenses and/or fixed income lags the increases in inflation. May’s 2018 Canadian economic growth measured by Gross Domestic Product (GDP) results were better than expected, with solid headline growth and broad based gains. The dispersion of output gains, meaning the broad participation across the economy was actually the best since 2004 (See chart). The only sector seeing a decline was utilities, although a giveback was always in the cards there after colder-than-normal temperatures had boosted the prior month’s output.
Enjoy the detailed discussion and analysis from our team at NBF Economics
The Teranet–National Bank National Composite House Price IndexTM rose 2.6% in June, the largest increase for that month in the index’s 19-year history. The table below breaks it down metropolitan areas:
Year over year, the national index up a record 14.2%. The hottest markets are Toronto (+29.3%—a record), Hamilton (+25.6%—also a record) and Victoria (+17.4%).
The June stats show that the Ontario government’s Fair Housing Plan intends to put a damper on Toronto house prices. Real new residential construction expenses and housing starts had not yet had a bearing in this regard. Given the plan’s effect on home sales and listings, the impact on prices should be felt soon enough.
The implications of these trends impact the net worth of approximately 75% of Canadian households. Residential real estate as an asset class is often the largest holdings within their overall net worth.
First Interest Rate Increase In Seven Years
The Bank of Canada (BoC) hiked its policy rate for the first time in seven years, raising the overnight rate 25 basis points to 0.75%. The BoC acknowledged that inflation remains low. The latest reading showed common core Consumer Price Index (CPI) rising only 1.3% on an annual basis. CPI weakness is considered “temporary”. National Bank Financial Economics continues to project inflation close to 2% by the middle of 2018.
Positive Economic Growth for Canada
This increase couples today’s forecast from the Conference Board of Canada (CBoC) anticipating an increase in GDP (Gross Domestic Product) growth in Canada from July 2017 forward. Housing is a key driver. The CBoC expects the Canadian economy to grow by 2.6% this year, before slowing to 1.9% in 2018. Enjoy the complete Economic Report and Forecast from our partners at National Bank Financial Here.
Entrepreneurs and business owners pull through to be the major engine of modest job growth for a mixed Canadian April jobs report. This contrasted the stronger U.S. job growth at 211,000 in April above the consensus forecast of 190,000. While each central bank held their interest rate policies in tack with neither an increase in central rates or investment strategies. Read more
Financial markets reacted very positively to the defeat of the nationalist party, Le Pen in the French election. “We took one of the biggest risk events of the year off the table,” said Tom Hainlin, global investment strategist at Ascent Private Capital Management. “I think people will now be focusing on the fundamentals — which have been good — and the European Central Bank, which continues to be accommodating.” Read More
For our clients who enjoy a global view of economic trends, we take a deep dive into the current financial conditions with our partners at National Bank Financial to determine world economics is turning a corner. Various economic indicators most notably strong U.S. and Canadian ‘Job numbers’ in March 2017 beat expectations on both sides of the border. The robust employment statistics endorse the forward looking equity markets with the Dow Jones Industrial Average (DJIA)* clinching a historic benchmark of 20,000 in late January 2017 only to quickly test 21,000 on March 1st, 2017. Many investors are asking what does this mean?
“After a disappointing 2016, the global economy seems to have turned the corner. A resurgence in economic activity in the advanced world, led by the U.S., is being complemented by an apparent rebound in China which is lifting emerging markets. That said, major uncertainties threaten to derail global growth including increased trade protectionism, elevated debt levels and political instability in places such as Europe.”
Enjoy the detailed discussion of current financial conditions in the “Monthly Economic Monitor” including the rebound of the Canadian Energy sector from our partners at National Bank Financial Markets, A division of National Bank of Canada.
*The DJIA is an equity index that is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange (NYSE) and the NASDAQ. The DJIA was invented by Charles Dow back in 1896. It includes Apple to Walmart today.