National Bank of Canada Eco. & Strat. Team
National Bank of Canada
Week in review
Canada – In October, housing starts fell 12.1% to 193K, not far from the 195K expected by consensus. Declines were registered in both rural and urban areas (-10.9% and -12.1%, respectively). In urban areas, the drop was largely due to multis (-15.3%), although singles were down as well (-5.4%). Urban starts were up in Ontario, but this advance was dwarfed by a sharp pullback in British Columbia, the Prairies, Atlantic Canada, and Quebec. Housing starts were expected to retreat after the prior month’s outsized gains. While the increase in residential building permits suggests that starts could be supported in the coming months, the outlook for residential construction is less rosy over the longer term. New mortgage rules should take some of the steam out of demand, to which supply will respond eventually. This is why we expect housing starts next year to sag to roughly 180K, a level more consistent with demographic needs.
In September, building permits decreased 7% in dollar terms. This was due mostly to a 22% slump in the value of nonresidential permits, which more than offset a 2.6% jump for residential permits. In real terms, residential permits rose 2.5% on a 3.9% increase for multis, while permit applications for singles were roughly flat.
United States – In October, the NFIB Small Business Optimism Index gained 0.8 points to 94.9. Three of the 10 index components declined, two were unchanged, and five rose. The net percentage of respondents (10%) planning to create jobs over the next three months was unchanged from the previous month. However, the percentage of owners that reported job openings they could not fill increased 4 points to 28%, which suggests the labour market is tight. In that environment, the net percentage of firms that raised wages in the past three months was up 3 points to 25% and a net 19% of firms (up 5 points) said they were planning to increase compensation in the next three months.
In September, job openings rose 33K after declining abruptly in August (-378K). As a result, the total number of available jobs stood just shy of 5.5 million. Openings have plateaued since reaching 5.8 million in April. The number of quits was pretty much level, leaving the quit rate unchanged at 2.1% for a fourth month in a row.
The U.S. election saw Donald J. Trump pull off a dramatic upset over Hillary Clinton. At this stage, financial markets are reacting to the president-elect’s conciliatory acceptance speech in which he suggested that infrastructure spending was at the top of his agenda. In the coming weeks, attention will focus on who will make up the new cabinet. As new initiatives will take time to implement, their impact on the real side of the economy will likely be felt more in 2018 than in 2017.
World – In October, China’s trade surplus widened to US$49.1 billion from US$42.0 billion in September. Market expectations were for a larger surplus (US$51.7 billion). Exports fell 7.3% from a year earlier after tumbling 10.0% y/y in September. Imports were down 1.4%. In October, the consumer price index in China rose 2.1% y/y, two ticks faster than the previous month. Excluding food, the CPI was 1.7% higher than a year earlier. Also in October, the producer price index rose 1.2% y/y. In September, the PPI had ticked up 0.1% y/y, its first positive y/y reading since March 2012.
This presentation may contain certain forward-looking statements about the 2009 Economic and Financial Outlook. Such statements are subject to risk and uncertainties. Actual results may differ materially due to a variety of factors, including legislative or regulatory developments, competition, technological change and economic conditions in Canada, North America or internationally. These and other factors should be considered carefully and readers should not rely unduly on National Bank of Canada’s forward-looking statements. This presentation may not be reproduced in whole or in part, or further distributed or published or referred to in any manner whatsoever, nor may the information, opinions or conclusions contained in it be referred to without in each case the prior express consent of National Bank.
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