Canada – In April, Canadian GDP grew 0.3%, one tick above consensus expectations. The goods sector expanded 0.8%, with gains in mining and energy outweighing declines in construction, utilities and manufacturing. Where this last sector is concerned, output fell 0.3% despite a sharp 3.6% increase in auto production. The services sector inched forward just 0.1% on thrust from wholesale trade and finance, insurance and real estate, which more than offset drag from elsewhere, particularly retail trade (-0.8%). April’s better-thanexpected GDP report interrupted a run of weak growth that lasted four months. The second quarter got off to a stronger start than anticipated, with GDP seemingly gearing for a print of roughly 2%. This would still be short of the 2.5% projected by the Bank of Canada in April. However, the Bank will publish a full update of its outlook for the economy and inflation on July 18, at which time we expect to see a downward revision of their forecasts.
In May, the Teranet-National Bank National Composite House Price Index rose 5.8% year over year, down a click from April’s print of 5.9%. Among the 11 metropolitan areas covered, the best and worst performers were, respectively, Toronto (+9.9%) and Victoria (-2.5%).
United States – In May, durable goods orders were up 1.1%. The prior month’s figure was revised down four ticks to -0.2%. Transportation orders climbed 2.7% on lift from non-defence aircrafts, although orders of motor vehicles and parts swelled a bit as well. However, ex-transportation orders advanced just 0.4%, thus disappointing consensus expectations for a 0.7% increase. Non-defence capital goods orders excluding aircraft, a measure of future investment spending, jumped 1.6%, failing to reverse the losses of the two previous months. Indeed, despite the gain registered in the month, these orders were down at an annualized pace of 7.4% over the three months ended in May. Total shipments of durable goods rose 0.7% overall but just 0.3% excluding transportation. Shipments of non-defence capital goods ex-aircraft sprang by just 0.4% after dropping 1.5% the month before.
Again in May, new-home sales vaulted 7.6 % to an annual pace of 369,000 units, their highest level since April 2010. Back then, sales were pumped up by tax incentives. Year to date, the median price of new homes was up 7.3% to $234,500, but this reflected strong month-over-month gains in February and January.
Still in May, personal income grew 0.2% in line with consensus expectations. In real terms, disposable income rose 0.3% for a third straight increase. Personal spending was flat (as expected by consensus) but eked up 0.1% in real terms. With income rising faster than spending, the savings rate climbed to 3.9%, its highest in four months. Always in May, the U.S. PCE deflator slid four ticks to 1.5% y/y (from an upwardly revised 1.9%) while the core PCE deflator fell two ticks to 1.8% (from an upwardly revised 2%). While lower gasoline prices and enticing interest rates are no doubt helping, consumers are nonetheless beginning to feel the effects of a weakening labour market. At this point, real consumption spending growth is tracking at just +1.2% annualized in Q2, less than half its pace in Q1.
In June, consumer confidence sagged for a fourth consecutive month. Consumers’ assessments of current conditions improved 1.7 points to 46.6, while their expectations dipped a point to 72.3. Overall, the Conference Board’s sentiment index slipped to 62 from a revised 64.4 in May.
Q1 GDP growth was confirmed at 1.9% as per the BEA's second estimate and in line with consensus expectations.
