MARKET STATISTICS: Weekly Change
ECONOMIC STATISTICS:
WEEKLY ECONOMIC REPORT
DECEMBER 15, 2014
Ronald Chow, Chief Economist ! ronaldchow@crescentschool.org
BANK OF CANADA LATEST TAKE ON RISKS Bank of Canada Financial System Review Bank of Canada’s semi-annual Financial System Review addressed four major risks for Canada. They are: 1) Household financial stress and a sharp correction in home prices (potentially severe impact, but low probability) 2) A sharp increase in long-term rates as monetary policies normalize (medium severity, low probability) 3) Stress from the euro area, possible with Russia as a trigger (medium severity, medium probability) 4) Stress emanating from a financial disruption in China (medium severity, medium probability). The Bank believes that these risks could hit Canada through three main vulnerabilities on the domestic landscape: 1) elevated household debt, 2) housing market imbalances, and 3) investor risk taking and illiquidity in financial markets. While there have been some shifting sands beneath the surface, there is no significant change in the Bank’s view on the severity of these risks, so surprisingly little implication for net change for the monetary policy.
IT’S BEGINNING TO LOOK A LOT LIKE CHRISTMAS U.S. Retail Sales – November U.S. retail sales jumped 0.7% in November, nearly doubling the consensus call. Auto sales jumped 1.7% in the month, which is pretty impressive considering unit sales held relatively steady from the prior month. Excluding autos, retail sales grew 0.5%, the highest in five months, and the 10th consecutive increase. It appears all of the major sectors had a busy, productive month. Only gasoline stations took in less, as pump prices fell more than $3/galloon in the month. Building materials, furniture clothing, eating out, and so on… were all higher. The U.S. economy continues to stand out like a beacon against the much weaker stats we’re seeing elsewhere in the world. This report reminds us that it is the trend that is important, not the one-month moves. The soft September has given way to a stronger October and November.
CANADIAN HOMEBUILDING HOLDING STEADY Canadian Housing Starts – November Canadian housing starts bounced back in November to 195,600 annualized units, from 183,700 in the prior month. The result was close to expectations, and continues to suggest that overall housebuilding activity in Canada is running about in-line with what is needed to satisfy demographic demand and some replacement. Multi-unit starts accounted for all of the rebound in November, rising from 112,600 from 99,100 in the prior month, while singles edged down to 68,300. Regionally, only 4 out of 10 provinces saw activity increase in November, but that list included heavyweights Ontario, Quebec and British Columbia. The Prairie provinces were the weak spot, including Alberta. While starts are still elevated in the province, the slide in oil prices suggests that we may have seen the highs for new building activity, at least for now. While the Bank of Canada has household imbalances on the watch list of risks to financial stability, there still doesn’t appear to be much overbuilding to worry about – and that goes for Canada’s 3 hottest cities as well. WEEKLY ECONOMIC REPORT
DECEMBER 15, 2014
Ronald Chow, Chief Economist ! ronaldchow@crescentschool.org
WHERE ARE OIL PRICES GOING?
Morgan Stanley has slashed its 2015 base case forecast to $70 from $98, and for 2016 to $88 from $102. In its bear-case scenario, the bank sees the crude benchmark falling to a low of $43 in the second quarter of next year. At the same time, the International Energy Agency cut its 2015 global oil-demand view by 230,000 barrels a day to about 900,000 a day. As well, the Organization of the Petroleum Exporting Countries trimmed its forecast for demand for its oil by 300,000 a day, to 28.9 million a day next year, compared with 29.4 million barrels a day in 2014. The direction of oil is up in the air amongst many experts. Only time will determine the fate of oil prices.
THE WEEK AHEAD United States Housing Starts – November - Tuesday, December 16, 2014 at 8:30am
Canadian Wholesale Trade – October - Wednesday, December 17, 2014 at 8:30am
Canadian Consumer Price Index – November - Friday, December 19, 2014 at 8:30am
Canadian Retail Sales – October - Friday, December 19, 2014 at 8:30am
UPCOMING CSIT MEETINGS Tuesday, December 16, 2014 - Team-Wide Meeting WEEKLY ECONOMIC REPORT
DECEMBER 15, 2014
Ronald Chow, Chief Economist ! ronaldchow@crescentschool.org