Week in review: US Q1 growth revised to the upside

Week in review

Canada – There was little on the domestic economic calendar this past week. The Survey of Employment, Payrolls and Hours (SEPH) showed that jobs in Canada were up 16K in April. Monthly jobs growth reported by this survey over the six months ended in April has averaged 9K, three times the average reported by the Labour Force Survey (3K) for its paid component over the same period.

According to the SEPH, weekly earnings rose for a fifth straight month in April, taking year-on-year wage growth to 2.5%. Annual wage growth topped the national average in sectors such as wholesale trade, manufacturing, and professional services. It was below average in the following sectors: public administration, construction, health care, education, accommodation/food services, administrative and support services, and retail trade. According to the LFS, the labour market in Canada has been holding steady despite growth concerns early in 2015. We are pleased to see the SEPH data corroborate the situation. What’s more, from November to April, the SEPH has painted a rosier picture in terms of new paid jobs, compared with the LFS. We also noted that income has been accelerating, which suggests that consumption could rebound over the rest of the year after a sub-par performance in Q1.

The Canadian Federation of Independent Business (CFIB) business barometer slipped more than a full point in June. Alberta’s oil production woes persisted in the month, which reflected on its index reading of 44.3. The province thus continued to wallow and remained the most downbeat of Canada’s ten. The gap between Alberta and neighbouring British Columbia struck a record high. All in all, the data remain consistent with our view that Alberta’s troubles are not contaminating the rest of the country unduly. In fact, optimism has grown in the other oil-producing provinces (Saskatchewan and Newfoundland and Labrador), with their respective indexes rising slightly from the previous month. Small businesses surveyed in the rest of the country were all relatively content with current market conditions.

United States – Existing-home sales rose 5.1% in May to an annualized 5.35 million, their highest rate since November 2009. According to the National Association of Realtors, first-time buyers accounted for 32% of the month’s purchases, compared with 27% a year earlier. All four regions recorded higher sales on the month. In the West, Midwest and South, they jumped 4.3% to reach an annualized rate of 1.21 million, 1.27 million and 2.180 million, respectively. In the smaller Northeast region, they sprang 11.3% to an annualized pace of 690,000 units. Sales of single-family homes grew 5.6% to an annualized pace of 4.7 million while those of multi-family units were up 1.6%. The median sales price for existing homes reached $228,700, up 7.6% from a year before. The 12-month growth was strongest in the West, where the median price gained 10.2%, and weakest in the Northeast, where it increased only 4.8%.

New-home sales were stronger than expected in May, rising 2.2% to an annualized 546,000 units. April sales were revised up to 534,000. In May, new-home sales were down in both the South and Midwest but up in the other two regions. The median sales price sagged 2.9% month over month, reflecting in part the fact that proportionally more starter homes were sold in May.

Durable goods orders were down 1.8% in May, while April’s decline was revised for the worse from 0.5% to 1.5%. After seasonal adjustments, the value of new orders at Boeing was down 35% on the month and motor vehicle orders were flat. Excluding transportation, orders were up 0.5% after sliding a revised 0.3% in April. Durable goods shipments recorded a fourth decrease (-0.1%) in five months. All in all, softness in the manufacturing sector seems to have carried over to another month as the effects of the strong dollar and the energy sector shock continued to be felt. However, some solace was provided by a 0.4% gain in new orders for capital goods excluding defence and aircrafts, which bodes well for future business investment.

In May, personal income and expenditures grew 0.5% and 0.9%, respectively, after increasing 0.5% and 0.1% the month before. The personal saving rate slid to 5.1% from 5.4% in April. The personal consumption price index increased 0.3%; excluding food and energy, it was up 0.1%. From 12 months before, the headline PCE price index rose only 0.2%, while the core index jumped 1.2%. Real disposable income grew 0.2%, compared with 0.4% the previous month.

The third GDP estimate indicated that the U.S. economy contracted an annualized 0.2% in the first quarter. The previous estimate had pegged the contraction at 0.7%. The updated figure reflected upward revisions to exports, personal consumption expenditures, private inventory investment, nonresidential fixed investment, and state and local government spending. According to the Bureau of Economic Analysis (BEA), these were offset in part by an upward revision to imports. Contributions to growth were as follow: personal consumption 1.43%, gross private investment 0.40%, government consumption -0.11%, and net exports -1.89%. On July 30, the BEA is slated to release its regular revision of the estimates for the most recent three years.

The University of Michigan consumer confidence survey increased to 96.1 in June. This is 5.4 points higher than the final reading for the previous month. The index of expectations six month from now gained 3.6 points to 87.8, while the current conditions index rose 8.1 points from last month to 108.9.

World – In China, the HSBC manufacturing PMI came in at 49.6 for the June period. It was up from a previous 49.2 and surpassed expectations for a 49.4 reading.

In the Eurozone, the advance consumer confidence index for June was down 5.6%, which was slightly better than consensus expectations for a 5.8% drop. However it continued to decline from the previous period. The Markit PMI’s for manufacturing and services increased to 52.5 and 54.5, respectively. The composite index was up as well, rising to 54.1 from a prior 53.6.