MARKET STATISTICS: Weekly Change
ECONOMIC STATISTICS:
WEEKLY ECONOMIC REPORT
DECEMBER 29, 2014
Ronald Chow, Chief Economist ! ronaldchow@crescentschool.org
SANTA CAME EARLY FOR THE U.S. U.S. Real GDP – Q3 Final The U.S. economy grew faster – much faster – than was expected. Real GDP jumped 5.0% annualized in Q3, the biggest quarterly advantage since 2003Q3. This is significantly higher than the 3.5% and 3.9% estimates. Nearly all aspects of the economy saw higher growth figures: consumer spending, business investment, government, inventories. However, export growth was trimmed and imports fell a bit faster than the previous estimate. Real gross domestic purchases grew 4.1% annualized (was estimated at 3.0%), and was the 2nd quarter in a row of 4%-plus gains. Final domestic demand grew 4.1% annualized (was estimated at 3.2%), which was a 4 year high. As well, final cells grew 5.0% annualized (was estimated at 4.1%), which in turn was an 8-year high. The economy carried much more momentum as it headed into the fourth quarter of 2014.
CANADIAN REAL GDP SURPASSES EXPECTATIONS Canadian Real GDP at Basic Prices – October Canadian real GDP climbed 0.3% in October, far surpassing expectations for a modest 0.1% gain. This follows September’s 0.4% surge, and suggests that growth will be solid in Q3 barring a collapse in November and December. Indeed, it looks as though the economy was in much better shape than expected before the huge drop in oil prices. There was unexpected strength in the mining, oil & gas sector, with activity up 1.2% on the month. This came following a 2% jump in September. Hence, mining, oil & gas activity is up 5.3% y/y; a repeat performance in 2015 looks unlikely. Manufacturing was also a strong surprise, as it was up 0.7%, far better than StatsCan’s manufacturing sales report, released earlier this month, suggested. Those two sectors, and a 0.3% gain in construction, powered the goods sector to a 0.4% rise. The services sector was solid as well, with a 0.3% gain. Hotels & restaurants (+0.4%), real estate (+0.3%), management services (+0.3%) and other services (+0.3%) were all firm as well. The Canadian economy is off to a surprisingly strong start to Q4 with the good handoff from September providing a nice additional boost. While growth will likely decelerate in the final two months of 2014, it looks as though Q4 GDP growth is going to be around 2.5% annualized unless November and December weaken materially. However, 2015 will likely be much more challenging as the drop in oil prices start to bite. GDP growth looks to decelerate to a sub-2.0% pace in 2015H1, the weakest since 2012. WEEKLY ECONOMIC REPORT
DECEMBER 29, 2014
Ronald Chow, Chief Economist ! ronaldchow@crescentschool.org
THE GRINCH STRIKES IN U.S.! U.S. Durable Goods Orders – November Businesses slashed their orders for big-ticket items last month, as U.S. durable goods orders unexpectedly fell in November, down 0.7% despite a huge run-up in Boeing’s plane orders. This is the third decline in the past four months. Excluding transportation, orders were down for the 2nd consecutive month, something unobserved this year. General machinery orders, communications and the auto industry received more orders. Nondefense capital goods orders excluding aircraft dipped 0.05% in November. Although this report is choppy and volatile, it is admittedly quite discouraging to see core orders drop for three months in a row (or 4 times in the past 5 months). However, the drop in orders does not necessarily suggest that businesses have swung away from being upbeat to being downright Grinch-like. This drop may be a result of businesses turning to hiring needs following two consecutive quarters of 11% gains in core orders.
U.S.: DECK THE MALLS U.S. Personal Income and Consumption – November Consumption rose 0.6% in November, and an expected 0.7% after inflation (or the lack of), marking a festive start to the holiday-shopping season. The gains were broad based, led by durables and non-durable goods, but even services spending has picked up lately. Consumer spending is on track for another quarter of 3.0%-plus growth, and should keep real GDP cruising at a 2.6% pace after the blow-out 5.0% rate in Q3. While business investment appears to have moderated this quarter, there is no mistaking the U.S. economy is on a stronger growth track, averaging about 3.0% since mid-2013, compared with 2.1% in the recovery’s first four years.
THE WEEK AHEAD
WEEKLY ECONOMIC REPORT
DECEMBER 29, 2014
Ronald Chow, Chief Economist ! ronaldchow@crescentschool.org