Canada – Housing starts in Canada dropped to 132.1K (-4.1%) in July after rising two straight months. Single-family units dipped to 52.5K from 53.1K while multifamily units slid to 61K from 67K. The sharpest declines were observed in Ontario (-6.7K) and Alberta (-2.4K). Quebec posted the biggest gains (+6.3K). Importantly, the 3-month moving average ceased falling and is currently at a 4-month high.
The Canadian trade balance registered a slim $55-million deficit in June, down from a $1.0-billion deficit in May. Exports rose $0.7 billion or 2.3%, driven by energy products (+$0.8 billion) and industrial goods and materials (+$0.4 billion). This was partially offset by declines in machinery and equipment and automotive products.
Imports sagged $0.4 billion, owing mostly to machinery and equipment (-$0.5 billion) and industrial goods and materials (-$0.3 billion). In real terms, the trade deficit shrank $0.5 billion to $4.5 billion thanks to an 11% increase in energy exports.
Manufacturing shipments outdid expectations in June with a 1.9% rise, 80% of which was due to the aerospace products sector, where sales rebounded (+61%) from an abnormally low level the previous month. The record surge on the month of 20.5% in the volume of new orders was particularly impressive.
United States – Productivity in Q2 jumped 6.4%, surpassing the consensus estimate of 5.5%. Unit labor costs diminished 5.8% while hourly compensation climbed 0.2%.
The U.S. trade deficit rose from $26.0 billion to $27.0 billion in June, short of the consensus estimate of $28.7 billion. The swell was due to a $3.9-billion increase in the petroleum deficit, driven by higher oil prices. The deficit excluding petroleum retreated from $12.7 billion to $9.8 billion, an 11-year low.
The FOMC kept its target range for the Fed funds rate unchanged this week at 0% to 0.25%. The Fed clarified its plans for the Fed Treasury purchases: Only the $300 billion previously committed will be spent and the program will expire by the end of October. In our opinion, the target range will need to be adjusted upward, possibly by yearend, for the sake of the Fed’s balance sheet.
U.S. retail sales flagged 0.1% in July, for a first setback in three months. However, the underlying trend is not as bad as this might suggest. Sales excluding gas stations and grocery stores, a better indicator of consumer discretionary spending, were actually up 0.2% for a third monthly increase in a row.
U.S. headline CPI was flat in July while core CPI rose 0.1%. Year-over-year headline CPI slipped to -2.1% from - 1.4% while core inflation slowed to 1.5% from 1.7% a month earlier. However, the year-over-year headline CPI has now probably reached its trough: Price momentum has shifted upward, as evidenced by the annualized 6-month rate of change back in positive territory.
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