FEATURED ARTICLE: Alberta has been here before MARKET STATISTICS: Weekly Change
ECONOMIC STATISTICS:
WEEKLY ECONOMIC REPORT
FEBRUARY 16, 2015, 5:00AM
Ronald Chow, Chief Economist ! ronaldchow@crescentschool.org
CANADIAN HOMEBUILDING IS STEADY… AT LEAST FOR NOW Canadian Housing Starts – January Canadian housing starts rose a greater-than-expected 4.5# in January to 187,276 units annualized. January’s report follows-up the prior month’s modest 179,637 tally. All of the strength was in multi-unit starts, which surged 12.3% to 115,000, a six-month high, while singles dipped 3.8% to 57,300, a ten-month low. Starts totaled 189k in 2014, and are starting 2015 consistent with that trend. Regionally, the breakdown was interesting. The Prairies were a surprising source of strength, climbing 26.3% to 57,800. That is slightly higher than 2014’s total, but should slow sharply as the huge drop in oil prices weighs on the region. With home sales in the province already dropping, starts are likely to follow suit in the next few months. Saskatchewan was already weakening amid strong supply, and the drop in commodity prices isn’t helping, with starts hitting a 23-month low of 5,500. Atlantic Canada also had a large percentage increase, rising 39.9% to 9,800. Ontario was slightly firmer was well, up 2% to 61,500. The overall level of starts remains relatively consistent with demographic demand, though we anticipate some deceleration from 2014’s pace. We are expecting a sharp shift over the coming months. The Prairies, Alberta in particular, will likely show materially, while Central Canada and B.C. look to maintain last year’s levels.
CANADIAN MANUFACTURING BOUNCES BACK Canadian Manufacturing Sales & Orders – December Canadian manufacturing sales jumped 1.7% in December, erasing November’s upwardly-revised 1.3% slump. Gains were broadly based, as nearly ever sector was higher. One major exception was petroleum and coal production, which dove 9.3%, driven by sharply lower energy prices. With that said, the rest of the report was encouraging. Manufacturing sales volumes were up an even stronger 2.9%, the biggest gain since July 2011 and erasing the losses in the prior two months. The level of volumes remains below the post-recession peak hit in July hi 2014, but only by 1%. December’s big gain lifted volumes 5.7% above a year-ago, just a tick shy of matching a 2½ -year high. The better U.S. growth and a weaker Canadian dollar appears to be providing a lift to Canadian manufacturing activity. However, high capacity utilization suggests that further growth might be more difficult to attain without increase investment in the sector. This solid report points to December GDP growth in the 0.2%-to-0.3% range., consistent with expectations. WEEKLY ECONOMIC REPORT
FEBRUARY 16, 2015, 5:00AM
Ronald Chow, Chief Economist ! ronaldchow@crescentschool.org
U.S. RETAIL SALES HIT BY STRONG GREENBACK U.S. Retail Sales – January The 0.8% drop in January U.S. retail sales was the second in a row, was 2x the consensus call (of -0.4%), and was broadly based. In other words, the latest report on U.S. retail sales was disappointing. All major areas, with a few exceptions, saw fewer sales, although there are pricing issues going on. Even excluding autos, sales were down 0.9%, matching the prior month’s drop. Fortunately however, excluding gasoline resulted in a net zero change, as gasoline plunged 9.3% thanks to the plunge in energy. As important as this release is as a gauge for consumer spending, this report is not price-adjusted so the truer picture of consumer spending will be in the monthly inflation-adjusted personal income and spending report, but that won’t be out until early March. Until then, there is some downside risk to Q1 consumer spending. However, given the solid backdrop… the strongest consumer confidence in years, the strongest job growth in years… much of this weak report was likely due to pricing and not volumes.
FEATURED ARTICLE: ALBERTA HAS BEEN HERE BEFORE The financial crisis of 2008 affected everyone, including the oil patch and the provincial coffers it filled. And while the pain it inflicted on Alberta was not insignificant, it was relatively short-lived, as the government had a huge savings account to buffer much of the blow. The economic emergency that Alberta faces today is different and perhaps more analogous to the predicament in which the province found itself in the early 1990s, when the accumulated debt reached $23billion due to a worldwide oil glut that led to a crash in the price of crude. The drop in oil prices has hit Alberta like a bomb; with the price of crude hovering around $50 a barrel, the news out of the oil towers in downtown Calgary gets worse every day – massive layoffs, scratching large projects. Now, the Premier and his Finance Minister have announced a nine per cent cut in program spending; nurses, doctors, and teachers should all best brace for wage cuts. As well, the Premier has suggested that the province will have to run small deficits likely for several years. Alberta’s winters are always frigid. This spring could be especially cold though.
THE WEEK AHEAD United States Housing Start – January - Wednesday, February 18, 2015 at 8:30am
United States Building Permits – January - Wednesday, February 18, 2015 at 8:30am
United States Producer Price Index – January - Wednesday, February 18, 2015 at 8:30am
Canadian Retail Sales - December - Friday, February 20, 2015 at 8:30am
UPCOMING CSIT MEETINGS Thursday, February 19, 2015 at 3:30pm - Team-Wide Meeting WEEKLY ECONOMIC REPORT
FEBRUARY 16, 2015, 5:00AM
Ronald Chow, Chief Economist ! ronaldchow@crescentschool.org