Canada – In June, Canadian retail sales rose 1.0%, outdoing expectations of a 0.2% increase and constituting a fifth advance in six months. The automotive sector recorded the strongest progression (+2.1%), propelled by gasoline station sales (+4.75). General merchandise stores turned in the weakest showing, sagging 0.6%. Retail sales excluding motor vehicles and parts were up 1.0% after rising 0.6% the month before. Gains were broadly based in 6 of 8 sectors. In constant dollars, retail sales increased 0.4% on the month. In volume terms, they rose a solid 1.9% in Q2 (annualized rate), suggesting the end of the consumer recession.
Corporate profits fell for a third quarter in a row for the first time since 2001. The decline in Q2 (-6.4%), however, was slower and less widespread than in the two previous quarters. Profits decreased 4.0% for non-financials and 13.1% for financials.
United States – Recent U.S. housing data were very positive and supportive of a stabilization of the sector. The seasonally-adjusted S&P/Case-Shiller Home Price Index rose 0.75% in June, its first increase since May 2006. Consequently, June may well mark the end of multiyear home price deflation. Moreover, new-home sales jumped 9.6% to 433K units in July, overshooting the 390K expected by the markets--a further sign that the sector has stabilized.
The Conference Board’s U.S. consumer confidence index surged to 54 in August from 47 a month earlier. The rise was led by a considerable swell in the expectations component from 63.4 to 73.5, its highest level since December 2007.
Durable goods orders vaulted 4.9% in July to $168.4 billion, a third increase in four months. Non-defence capital goods orders excluding aircraft edged down 0.3% after rising 3.6% the previous month. Durable goods inventories dropped 0.8% on the month for a seventh consecutive monthly decline.
The first revision to Q2 real GDP growth was better than anticipated with the rate left unchanged at an annualized -1.0%. Market expectations were for a revised -1.5%. Personal consumption, too, slid 1.0% on the quarter. Looking forward, we expect Q2 to be a turning point for the U.S. economy. We believe Q2 will mark the end of the U.S. recession and predict Q3 real GDP growth will attain an annualized rate of 4.0%.
U.S. consumer spending was in line with expectations in July, crawling up 0.2% and boosting volume sales for a third time in as many months, their best run since the start of the recession. The July report was further brightened by wage gains on the month, the first in a year.
