United States – Retail sales jumped 1.3% in April

Week in review

Canada – Housing starts fell 5.4% to reach 191.5K in April. That was roughly in line with consensus expectations. The decrease in starts was felt in both urban (-4.6%) and rural areas (-12.5%). The decline in urban starts was split between multis (- 4%) and single family homes (-5.8%). On a regional basis in urban areas, there were sharp declines in Ontario (-26.7%) and Quebec (-7.7%) which more than offset gains in BC (+14.4%), the Prairies (+37.7%) and Atlantic Canada (+47.3%).

The Teranet–National Bank House Price Index rose 1.2% in April thanks to gains in ten of the 11 metropolitan regions covered. On a year-on-year basis, home prices were up 8.1% nationally. There were above-average year-on-year increases in Vancouver, Toronto, Hamilton and Victoria, which averaged a hot 13.8%. The seven remaining cities in the index ─ Calgary, Edmonton, Winnipeg, Ottawa-Gatineau, Montreal, Quebec City, Halifax ─ are contracting 1.3% on average (10th consecutive month in negative territory on a year-on-year basis). So, the Canadian real estate market is already in correction mode. The only outliers, for now, are four cities which are in provinces blessed with above-average employment creation and solid immigration levels.

Statistics Canada’s survey of investment intentions conducted between October 2015 and January 2016 showed private and public sectors planned non-residential investments of $241.6 billion this year, 4.4% less than last year. In the oil and gas industry, investments are expected to be 26.3% lower than last year. Manufacturers expect to spend 10.9% less mostly due to motor vehicles and parts and primary metals. Oil and gas and manufacturing explain most of the decline in private sector investments (-9.3%). That is partially offset by an increase in the public sector (+6.5%). On a regional basis, nominal investments are expected to be down in six provinces out of 10 including the three oil-dependent provinces (Alberta -11.9%, Saskatchewan - 17.7% and Newfoundland and Labrador -10.0%), New Brunswick (-7.3%) , BC (-3.7%) and Ontario (-0.1%). Investments are expected to be up in Nova Scotia (+16.6%), Prince Edward Island (+16.2%), Quebec (+7.1%) and Manitoba (+3.4%).

Nearly 90% of Alberta’s oil town of Fort McMurray was reportedly intact after wildfires wreaked havoc in the region. But the 2,400 buildings that were destroyed in the fire should translate into insurable damage much higher than what was booked by insurance companies after the 2011 Slave Lake fires. With the wildfires disrupting oil production, Canada’s GDP growth is set to be negatively impacted in the second quarter before bouncing back in Q3. For more information see our latest Special Report: Alberta’s wildfires in context.

United States – Retail sales jumped 1.3% in April, thanks in part to a 3.2% surge in sales of motor vehicles/parts. Excluding autos, sales rose 0.8%. Ex-auto sales were helped by higher pump prices again this month, but even excluding gasoline stations, sales were up a strong 0.6% in April with widespread gains across major categories (only building materials sales were down in the month). All in all, although other sectors in the economy could be a source of concern (e.g. exports and business investment), GDP growth seems to be well supported by consumers.

The Job openings and labor turnover survey (JOLTS) showed 5.8 million job openings at the end of March. The quits rate in the private sector was unchanged at 2.3%.

The producer price index rose just 0.2% in April. On a yearon- year basis, the PPI was flat and at just 0.9% for the core measure. Import prices rose 0.3% in April thanks mostly to petroleum. Excluding petroleum, import prices were actually up just 0.1%, or down 2.2% on a year-on-year basis. That measure, which tends to be correlated with both the core CPI and core PCE deflator with a lag, suggests core inflation will remain soft over the coming months.

World – China’s trade report for April was disappointing with exports falling 1.8% and imports slumping 10.9%, both on a year-on-year basis. The annual inflation rate was unchanged at 2.3% in April. The Bank of England left monetary policy unchanged this week. In the Eurozone, January’s 2.4% surge for industrial production was largely erased by a 1.2% drop the following month and a 0.8% decline in March. Lower March output in Germany and France among others more than offset gains in Spain. The zone’s second estimate of Q1 GDP growth came in at 2.1% annualized (one tick lower than the advance estimate). Germany’s output grew 2.7% annualized in the first quarter while the zone’s other members grew roughly 1.9% on average. While the zone’s output is now back to levels reached eight years ago, that’s largely due to Germany ─ ex-Germany the zone’s output remains about 2% below levels of 2008.

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