Weekly Economic Commentary January 11, 2019

U.S. Review

All We Need Is A Little Patience

• Fed officials this week reemphasized that they would exercise patience, making a pause in rate hikes in March more likely.
• The CPI fell 0.1% during December owed to lower energy prices. Core CPI increased 0.2% and is up 2.2% year-to-year.
• The ISM non-manufacturing index fell from 60.7 in November to a still-elevated 57.6 in December. New orders rose to 62.7.
• The NFIB Small Business Optimism Index fell to 104.4 in December, the fourth consecutive drop.
• The federal government remains partially shut down, leading to numerous data reports being postponed this week.

Global Review

Slow Growth, Slower Central Banks

• The Bank of Canada (BoC) held its policy interest rate at 1.75% this week, as expected, and said lower oil prices would depress growth over the next couple of quarters. However, the central bank sees a return to above trend growth over the medium term, and we still expect the BoC to raise rates later this year.
• Eurozone data were a mixed bag this week, with some stability on the services side but softness in the industrial sector. We do not view the figures as weak enough to signal an imminent recession, but they could be soft enough to slow Eurozone monetary tightening. In the U.K., economic growth remained sluggish ahead of a key Brexit vote due next week

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