“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.
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.
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
A little inflation measured by the Consumer Price Index (CPI) is not a bad thing. The North American central banks being the Bank of Canada (BoC) and the U.S. Federal Reserve (The Fed) manage monetary policy and set interest rates. Both are targeting to manage inflation. The good news is that the U.S. and Canadian monetary policies are aligned and not competing against each other.
How does the Inflation outlook impact interest rates?
The Canadian April employment numbers that were announced last week saw a “Cooling of employment” literally as a colder-than-usual April may have temporarily hurt hiring in some sectors. But the soft headline number doesn’t necessarily mean Canada’s labour market is struggling. Looking longer-term, the April jobs report does nothing to change our view that the labour market remains tight and will continue to fuel inflation pressures this year. As such National Bank Financial Economics Partners continue to call for a July interest rate hike from the Bank of Canada.
Canada’s GDP (Gross Domestic Product) has rebounded in February 2018 with the largest surge since May 2017 due primarily to a recovery in energy prices complemented by a broad sectorial surge. Canada’s economy beat estimates by growing 0.4 percent. The breadth of increases is encouraging, particularly the observed bounces in the agricultural, mining, oil and gas, retail, arts/recreation, professional and information services industries. Of the twenty industrial sectors, fifteen registered increases in output during February. As a result, industrial production jumped 1.4%, the biggest increase since May last year. Q1 growth may well end up topping the Bank of Canada’s estimate of 1.3%.
Canada took a breather in August after a strong first half of 2017. August saw the first monthly drop of output this year. This is not a reason for concern, while the majority of broad industries saw gains in August (12 out of 20), the few that experienced declines were significant enough as to lead to an overall drop. This pullback was against the backdrop of a very strong recovery through the first part of 2017 as Canada lead its trading partners in GDP growth.
Hampton Securities Limited is pleased to announce three professionals have joined our highly qualified team. Mr. Michael MacMenamin has joined the firm’s institutional trading group in Toronto. Mr. Rafael Garcia has joined the firm’s Wealth Management Group in Toronto, as Vice President and Portfolio Manager. Mr. Steven Carinci has joined the firm’s Wealth Management Group in Vaughn, Ontario as Senior Vice President and Investment Advisor.
Mr. Michael MacMenamin has over 25 years’ experience in the financial capital markets, specializing in identifying and executing trading opportunities in the equities market. Over his career, Mr. MacMenamin has developed and maintained strong trading relationships with many Canadian Buy-side firms and U.S. Broker Dealers.
Mr. Rafael Garcia has over 20 years’ experience in the financial markets having previously worked in wealth management at several Canadian banks. Mr. Garcia will be spearheading our South and Central America wealth management strategy, focusing on high-net-worth clients and large institutions in Latin America, with a key specialization in Emerging Markets.
Mr. Steven Carinci has over 19 years of experience as a financial advisor, providing wealth management and investment counsel to affluent families, small business owners and institutional clients in Canada and is an active supporter of many recognizable charities and foundations, such as Villa Charities, Right to Play, Free The Children, and the Barrie Chamber of Commerce.
As an independent investment dealer, Hampton Securities is dedicated to providing unbiased investment solutions, combined with unparalleled service, and we excited that Mr. MacMenamin, Mr. Garica and Mr. Carinci shares these values as they join our unique and growing firm.
We hope everyone is enjoying their last gasp of summer over the Labour Day Weekend. The good news is that the Canadian economy is robust and growing in sync with the world economy. Remember that news headlines tend to be negative but there are a lot of reasons to be optimistic including:
Canada’s GDP (Gross Domestic Product which measures overall economy health) expectations are near 3.0% for 2017. More importantly this represents an increase of 4.6% in the 12 months leading up to the end of May.
Canadian’s disposable income (after expenses) has surged 6.6% which has increased overall domestic demand. Canadian consumers are confident.
The U.S. Economy is also on solid footing the Bureau of Economic Analysis revised up from 2.6% to 3.0%, the highest quarterly rate in two years.
While trade agreements such as NAFTA renegotiations loom large and interest rates will likely increase in the next week or quarter, the Canadian Conference Board Index climbed to 122.9 from 120.0 in July. This was well above its 12-month moving average of 114.7. The details of the report showed the present situation tracker jumping 5.8 points to a 16-yearhigh of 151.2. It appears as labour markets tighten and most financial markets achieve new highs the Fall of 2017 looks promising.
“We are raising our GDP growth forecast for 2017 to 2.4%”. An update from our partners at National Bank Financial (NBF Economics) after the better-than-expected handoff from last year in 2016 (after upward revisions to Q4). In addition, Q1’s solid start coupled with economic growth in March 2017 was surprisingly strong. Another good piece of news is Canadian labour productivity registered its second biggest quarterly gain in the last 10 years, rising 1.4% in Q1.
In April 2017, the merchandise trade deficit narrowed to just C$0.4 billion from a revised C$0.9 billion in March. Exports rose 1.8% to a record high of C$47.7 billion, led by gains for energy products. For more detailed insight enjoy a full report from NBF Economics: