MARKET STATISTICS: Weekly Change
ECONOMIC STATISTICS:
WEEKLY ECONOMIC REPORT
DECEMBER 22, 2014
Ronald Chow, Chief Economist ! ronaldchow@crescentschool.org
CANADIAN INFLATION STEPS BACK Canadian Consumer Price Index – November Canada’s inflation rate fell a deeper-than-expected 0.4%, hacking the headline inflation rate to 2.0%. Core prices also took a surprising drop of 0.2%, shaving the annual core rate to 2.1% y/y (from 2.4%). Details of the release showed that there didn’t seem to be much pass-through from the latest slide in the Canadian dollar. Heavy discounting around Black Friday likely held down clothing prices (down 2.3%). Entertainment equipment fell in the month and is now down to 6.6% y/y. Travel services also fell much more than usual, likely helped by the drop in energy prices. On the flip side, food prices just keep climbing, with groceries up 3.3% from year-ago levels, the biggest increase in three years. The pullback in both headline and core prices provides some heavy-duty support to the Bank of Canada’s view that much of the prior run-up in CPI was “transitory”. Headline inflation is poised to take a further step back amid the latest drop in gasoline prices, although core looks to hang around the 2%. In some ways, Canada is facing almost an ideal inflation backdrop – not too hot, not too cold. That’s unlike most of the rest of the world, where almost the entire industrialization world is fretting about lowflation, while much of the developing world is grappling with inflation in the 5%-to-10% range.
U.S. INFLATION LACKS ENERGY U.S. Consumer Price Index – November U.S. consumer price inflation remains very modest, with the headline measure falling a more-than-expected 0.3% in November, pulling the y/y trend down to 1.3% from 1.7% in the prior month. This is the slowest increase since February, and the first monthly drop since August. It is also the largest drop since December 2008. As expected, it was all about energy, or the lack thereof. Energy plunged 3.8% with gasoline off 6.6%, which is about 10.5% below year-ago levels. There was also lower prices for housing fuels, furniture, cars and recreation. Price pressure remains in areas such as medical care (biggest monthly increase in over a year) and prescription drugs, as well as rents. Interestingly, food rose just 0.2% in the month that saw record high cattle prices. Excluding food and energy, core prices squeezed out an as-expected 0.1% gain, cooling the y/y increase to 1.7%. If you’re looking for signs of inflation, you will have to look elsewhere. WEEKLY ECONOMIC REPORT
DECEMBER 22, 2014
Ronald Chow, Chief Economist ! ronaldchow@crescentschool.org
CANADIAN HOUSING: AND THEN THERE WERE 2? Canadian Existing Home Sales – November Canadian home sales held steady in November, leaving activity up a modest 2.7% in the past year. While sales are still running comfortable above their 10-year average, activity has leveled off since peaking in August. With sales running at around 56% of new listings, the months’ supply of homes for a sale was a very-normal 5.8, leaving the national picture balanced. Prices continued to push higher, but all signs suggest that momentum has leveled off with the average transaction price up 5.7% y/y. Sales in Calgary grew a tame 5.5% y/y in November, possibly due to the slide in oil prices. New listings jumped 15% y/y, and sales registered flat while new listings popped more than 35% y/y. This could suggest that Calgary’s market could be rolling over. Meanwhile, Vancouver prices continue to rise a 5% y/y-plus pace, with the sales-to-new listings ratio topping 58%, up almost 8 ticks from a year ago. Toronto benchmark prices were up 7.7% in November, with detached homes in the city arguably the strongest sub-market in Canada, now that Calgary is poised to slow. Single-family homes are up almost 9% y/y, or twice the rate of condos. Canada’s housing market continues to look balanced on a national basis, with strong price growth coming from 3 cities. However, it is suffice to say that Calgary can be soon crossed off that list, leaving Vancouver and Toronto, where most of the gains are beginning fanned by lack of supply in the detached market.
U.S. HOUSING STARTS ARE MESSY U.S. Housing Starts and Building Permits – November U.S. housing starts fell 1.6% in November, more than expected. Surprisingly, despite the colder-than-usual snap, more ground was broken everywhere except in the South. However, building permits took a 5.2% drop in November, and fewer permits were granted for singles and multis, -1.2% and -11% respectively. This is a messy housing report, and Mother Nature had a hand. However, this is likely a temporary setback.
THE WEEK AHEAD
WEEKLY ECONOMIC REPORT
DECEMBER 22, 2014
Ronald Chow, Chief Economist ! ronaldchow@crescentschool.org