Market Focus Canadian consumers roar back After staying out of stores in March and April, Canadian consumers stepped back into the malls during May. Updated figures from Statistics Canada showed a 1.9% monthly jump in retail sales, the largest since March 2010. Gains were widespread as nine of the eleven major sub-sectors reported higher sales levels. Motor vehicles continued to lead with a 4.3% advance during May and a 9.8% year-over-year gain. All ten provinces also reported improved sales figures during the month and Alberta continued to report the strongest growth, boasting a 7.9% improvement compared to a year ago. The broader rebound should go a long way toward helping the overall consumer figures in the quarterly GDP results as, even with only modest follow-through in June, total sales for the three month period will likely be the best in six quarters. U.S. housing strengthens further Sales of new homes in the U.S. continued to gather momentum in June, despite increases in mortgage rates. The 497,000-unit (annualized) sales level recorded during the month was the strongest seen since May 2008. In addition, the 38.1% annual growth rate is now the fastest pace since January 1992. Not surprisingly, the gain in sales left inventories depleted as only 3.9 months supply remained in the pipeline. This matches the lowest level seen since May 2004. Prices also reflect the current demand as the median sale price for a new home was 7.4% higher in June 2013 than it was a year earlier. Japan ramps up exports Japan’s efforts to moderate the value of the yen appear to be bearing fruit. The latest foreign trade data show a solid 7.4% year-over-year advance in exports during June, a fourth consecutive gain. Detailed figures showed that shipments to the European Union climbed 8.6% from a year earlier, the first gain in 21 months, after plunging 21.0% in June 2012. Exports to the U.S. rose 14.6%, while those to China gained 4.8%. The yen has declined some 22% versus the U.S. dollar over the past 12 months. Despite the positive export news, key imports, particularly oil, have become significantly more expensive. This influence is expected to remain intact until Japan’s nuclear plants can return to full service. Longer View With interest rates at historic lows and government stimulus efforts keeping rates low, we believe inflationary pressures will eventually emerge, resulting in higher interest rates down the road. Investing in equities is one of the best ways to stay ahead of inflation. Having a professional advisor who can provide a diversified portfolio that takes into consideration your risk tolerance can help protect your investment returns from inflation. Market Board – Weekly Summary July 22 ▼ According to the U.S. National Association of Realtors, existing home sales dipped 1.2% to a seasonally adjusted annual rate of 5.08 million in June from a downwardly revised 5.14 million in May, but are 15.2% higher than the 4.41 million-unit level in June 2012. These results are weaker than expected. Activity in the housing market has a significant “ripple” effect on the broader economy. July 23 ▲ Statistics Canada reported that retail sales jumped 1.9% to $40.4 billion in May, the largest monthly rate of growth since March 2010. This followed relatively flat sales in the previous two months. The gains were widespread as higher sales were reported in 9 of 11 subsectors, representing 94% of total retail trade. This figure is well above consensus estimates. Since consumer spending accounts for over 60% of Canadian economic activity, it is critical to overall GDP results. July 24 ▲ The U.S. Census Bureau announced that new home sales totalled 497,000 units (seasonally adjusted annual rate) in June 2013. This is 8.3% above the revised May rate of 459,000 units and 38.1% above the June 2012 level of 360,000 units. These results are well above consensus estimates. July 25 ▲ The U.S. Department of Labor reported that initial jobless claims totalled 343,000 (seasonally adjusted) in the week ending July 20, an increase of 7,000 from the previous week’s revised figure of 336,000 (previously reported as 334,000). The four-week moving average was 345,250, a decrease of 1,250 from the previous week’s revised average of 346,500 (previously reported as 346,000). These results are in line with market consensus. ▲ The U.S. Census Bureau announced that durable goods orders increased 4.2% in June. Excluding transportation, new orders increased less than 0.1%. Excluding defence, new orders increased 3.0%. Prior estimates were also revised higher. These figures are stronger than market expectations. Orders for durable goods indicate how busy manufacturers will be in the months to come, as they work to fill those orders. ▲ Statistics Canada reported that average weekly earnings increased 0.9% to $914.68 in May, fully offsetting declines in March and April. On a year-over-year basis, average weekly earnings rose 2.5%. These results are stronger than expectations. As this indicator measures growth in income, it can reveal trends in consumer spending. July 26 ▲ The Thomson Reuters/University of Michigan index of consumer sentiment rose to 85.1 in the month-end reading for July. This is significantly stronger than the 83.9 level recorded mid-month and the 84.1 reading for June. This is now the highest reading since the end of the recession and is stronger than market expectations. This is another indicator of the likely pattern of consumer spending. Although the above information has been compiled from sources believed to be reliable, as at the date indicated, we cannot guarantee its accuracy or completeness. The information is provided solely for informational and educational purposes and is not to be construed as advice in respect of securities or as to the investing in or buying or selling of securities, whether express or implied. All data provided is subject to change without notice. The authors of this publication are employed by CI Investments Inc. or its affiliates. CI Investments and the CI Investments design are registered trademarks of CI Investments Inc. Neither CI Investments Inc. nor any of its affiliates or their respective officers, directors, employees or advisors is responsible in any way for damages or losses of any kind whatsoever in respect of the use of this information. © 2013 CI Investments Inc.
Posted on: Mon, 29 Jul 2013 14:13:51 +0000
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