Let’s delve into the country specific
data.
The Bank of Canada maintained their
current .5% interest rate policy this week, offering the following assessment
of the Canadian economy:
The Canadian economy’s adjustment to lower oil prices is largely
complete and recent economic data have been encouraging, including indicators
of business investment. Consumer spending and the housing sector continue to be
robust on the back of an improving labour market, and these are becoming more
broadly based across regions. Macroprudential and other policy measures, while
contributing to more sustainable debt profiles, have yet to have a substantial
cooling effect on housing markets. Meanwhile, export growth remains subdued, as
anticipated in the April MPR, in the face of ongoing competitiveness
challenges. The Bank’s monitoring of the economic data suggests that very
strong growth in the first quarter will be followed by some moderation in the
second quarter.
OPEC’s decision to increase oil
production had a strong negative impact on western Canada, which had seen a
boom of tar sands related activity. But
according to the central bank, the adjustment is now over. They also describe a standard series of
economic cause and effect events, starting with a declining unemployment rate:
The jobless rate dropped from
7.3% at the beginning of 2016 to its current level of 6.5%. This has increased consumer confidence, which
translates into higher consumer spending:
Y/Y retail sales increase have
risen from 1% in 2015 to their current strong pace of just under 7%. And the other half of the economic equation –
businesses – are also increasing their activity:
The top chart shows the Canadian
PMI index, which has risen strongly since the beginning of 2016. This has translated into strong gains in
industrial production, as shown in the second chart.
The combination of these
developments has led to an increase in Canadian GDP:
The above data indicates that
Canada has recovered nicely from oil’s price drop.
The ONS released the 1st
revision to the UK’s 1Q GDP report.
Overall GDP increased .2% from the previous quarter:
This is one of the weakest
readings for from the UK since 2012. Moreover, the Q/Q number has weakened in
the last 9 quarterly reports. This is
translating into a slightly lower Y/Y growth rate:
The only news from the EU was the latest
Markit numbers: manufacturing rose to a 6-year high of 58.4; services
marginally decreased .2 to 56.2; the overall number was unchanged at 56.8. But the report contained this very positiveanalysis:
With backlogs of work across the two sectors registering the
second-largest rise in six years, firms again took on staff at a pace rarely
seen in the survey’s history in order to expand operating capacity. The overall
rise in employment was the second-largest since August 2007, with manufacturing
adding jobs at the steepest rate in the survey’s 20-year history. Service
sector job gains matched those seen in April, sustaining the best spell of
employment growth that the tertiary sector has enjoyed since early-2008.
In recent public commentary, the
ECB noted a very important feedback loop was occurring: job gains were
increasing consumer confidence which, in turn, was supporting increased
consumer spending. Here is the data:
The top chart is the EU
unemployment rate, which has consistently decreased for the last 4 years. That has supported retail sales (bottom
chart), which have steadily increased over the same period of time.
Finally, there were two pieces of economic
data from Japan. The market number
decreased marginally, falling .2 to 52.
And prices remain weak: overall, they increased .4 while core prices
were unchanged.
