Weekly Economic Report
September 15, 2014
Canadian Business Spending Falls While investment wasn’t exactly weak – its 12.4% share of GDP is slightly above the three-decade mean and close to U.S. levels – the recent slump as indicated by the report is cause for concern. Machinery & Equipment spending is below pre-recession levels, and spending on intellectual property fell even more. Until Canadian companies reboot spending, one-eighth of the economy will remain dormant and job growth will remain slow. Fortunately, the export tide is turning for good. After growing an average 1.3% in the previous two years, real exports soared 18% annualized in Q2 as the U.S. economy sprung back to life. Although this recent downturn in investments is worrisome, it won’t last long if Canada’s new growth engine, exports, shifts into high gear.
A Good Summer for U.S. Retailers
Debt Ratio Rises in Canada Canadian National Balance Sheet Accounts – Q2
U.S. Retail Sales – August
Canadian household debt ratios rose in the second quarter of 2014, now sitting at 163.6% as opposed to 163.1% in Q1. This did reverse only a small portion of the improvement seen over the past two quarters. As well, household net worth hit an all-time high of 735% and gross general government debt fell to 110% of the GDP, down from 2013 Q2’s 13-year high. The Canadian economy seems to be slowly evolving, becoming stronger and stronger once again.
U.S. retailers were extremely busy in August, in a good way. Sales jumped 0.6% last month, the 7th consecutive monthly gain, matching expectations as strong activity occurred across all sectors. The sales report of August is certainly good news that the U.S. economy is performing extremely well, and may indicate that consumer spending is strong as well.
Important Economic Statistics
The Week Ahead Canadian Manufacturing Sales and Orders – July - Tuesday, September 16, 2014 at 8:30 am
United States Producer Price Index – August - Tuesday, September 16, 2014 at 8:30 am
United States Consumer Price Index – August - Wednesday, September 17, 2014 at 8:30 am
Canadian Consumer Price Index – August - Friday, September 19, 2014 at 8:30 am
Ronald Chow, Chief Economist • ronaldchow@crescentschool.org