FEATURED ARTICLE: Oil Sands are fine with oil price MARKET STATISTICS: Weekly Change
ECONOMIC STATISTICS:
Canadian Consumer Price Index – January Consumer prices dropped 0.2% m/m in January, clipping the headline annual inflation rate to 1.0% y/y from 1.5% in the prior month and a recent peak of 2.4% last October. A 12.5% monthly plunge in gasoline prices accounted for the bulk of the move. However, core inflation remains much more stable, with underlying prices rising 0.2% m/m and the annual pace holding steady at 2.2% - marking six consecutive months above the BoC’s 2% target. Just as headline inflation has been falling steadily at a 0.2% seasonally adjusted pace in recent months, core CPI has been grinding higher at that same clip. Aside from gasoline, there were few signs of weakness in Canadian price trends. In fact, the lower loonie’s wingprints were all over the report. Clothing & footwear prices ticked up 2.1% y/ y, after declining almost consistently over the past decade. Similarly, auto prices are now up 1.1% y/y while grocery costs word to a honking 5.4%. Overall, Canada’s headline inflation rate is now a full 1.1 percentage points jumped above its U.S. counterpart; while that’s not the widest gap in recent memory, it’s toward the upper end – blame it on the loonie. Canadian inflation took a step back in January, but not nearly to the same degree as in much of the rest of the industrialized world. Why?...The near-record drop in the Canadian dollar has pushed up a wide variety of import prices.
U.S. Consumer Price Index – January U.S. consumer prices remained well contained in January…thank you strong greenback and oil for that. Headline prices fell 0.7% in the month, more than the expected 0.6% decline and the third consecutive drop, dragging the y/y gains to minus-0.1%, the first fall from year-earlier levels since October 2009. The dive in energy accounted for all of the weakness. The component, which makes up 8% of the total, declined seven months in a row, with the latest 9.7% slump the biggest since November 2008. It would also be important to note that gasoline, which was down 9.2% in December alone, or 21% y/y, fell another 18.7% in January. Food prices, which is about 15% of the total index, remained flat, while the trend from a year ago eased a bit to 3.2% from 3.4% in December. Most importantly, prices excluding food & energy edged up slightly faster than expected at +0.2% (on the tail of two straight readings of +0.1%), but the y/y trend held steady at 1.6% y/y… still low. Overall, the stronger USD should continue to hold import prices down, and the same goes for energy. We expect overall prices to stay low and potentially core CPI to stabilize.
U.S. Durable Goods Orders – January U.S. durable goods orders snapped back in January. The consensus-beating 2.8% gain was the first improvement since October and the largest since July. Nondefense aircrafts and parts surged nearly 130%, despite the fact that Boeing took in just 5 new orders last month (fewest since Jan. 2013). Excluding transportations, orders were also higher, but below consensus, at 0.3%. Core orders, which are orders of nondefense capital goods excluding aircraft and a good proxy for future capital spending, rose 0.6% in January. Although this does not erase even the prior month’s setback, it does at the very last suggest that Q2 will start off on a firmer footing. Core shipments were up a solid 1.0% as well, suggesting the Q1 started off steadily. There should be more support on the way, and more orders rolling in again as the West Coast ports dispute was finally settled.
“Even with crude down 52 percent since June, the output will grow 3.5% this year from the Oil Sands. The Canadian dollar is near a six-year low and materials cost less, helping oil sands producers cut cost and keep pumping. Oil would have to stay between $30 and $35 a barrel for at least six months, before wells and mines are shut, according to the Canadian Energy Research Institute.” – Bloomberg. This quote is a highlight of a terrific report from Bloomberg which underscores the comfort of oil sands producers at the $50 per barrel West Texas Intermediate crude oil benchmark price. This post is even more important in light of all misleading statistics which should that producers are unprofitable – those average numbers do not account for quality of wells, stage of production and other important factors which in the end result in each producer to have their own cost curve.
United States Personal Income & Consumption – Jan. Canadian Real GDP – Q4 - Monday, March 2, 2015 at 8:30am - Tuesday, March 3, 2015 at 8:30am Bank of Canada Policy Announcement - Wednesday, March 4, 2015 at 10:00am
United States Factory Orders – January - Thursday, March 5, 2015 at 10:00am
Canadian Merchandise Trade Balance – January - Friday, March 6, 2015 at 8:30am
United States Employment Report – Feb. - Friday, March 6, 2015 at 8:30am
Canadian Building Permits – January - Friday, March 6, 2015 at 8:30am
United States Consumer Credit – January - Friday, March 6, 2015 at 3:00pm
Tuesday, March 3, 2015 at 3:30pm - Team-Wide Meeting