Market Pulse - The week in review - March 1st
Duncan Presant - Mar 06, 2024
The Canadian economy was slightly stronger than expected last quarter, growing at 1% (annualized).
THIS WEEK’S RECAP:
▪ The Canadian economy was slightly stronger than expected last quarter, growing at 1% (annualized). A decent rise in export activity and a slight increase in consumption helped offset a large quarterly drop in government spending and anemic business investment. Overall, the economy continues to tread water, well below trend-growth while avoiding a more severe recession-like deterioration.
▪ U.S. GDP for the fourth quarter of 2023 was revised to 3.2%, a minor adjustment of -0.1%. However, this revision included positive developments, including a rise in consumption, capital expenditures, and residential investment. Inventory investment slowed, which counterintuitively, may be reason for optimism for Q1 with the potential for larger inventory restocking.
▪ The US personal consumer expenditure (PCE) price index, the Federal Reserve's preferred gauge of inflation confirmed that prices remained sticky in January, with service prices being the main culprit. With the Federal Reserve now firmly in data-watch mode, the importance of February's economic performance is heightened with the first big release coming next Friday in the form of employment and hourly earnings.
▪ The widening gap between U.S. and Canadian short-term interest rates has led to recent US dollar strength, driving the Canadian dollar to its lowest point this year. Nonetheless, with few catalysts to justify a more pronounced move in the currency, we expect CAD to remain well within the range seen last year for the time being.
ON DECK FOR NEXT WEEK:
▪ The Bank of Canada is expected to keep is target rate unchanged on Wednesday and will likely signal the need for more concrete evidence on the inflation front before committing to lower borrowing costs.
▪ The European Central Bank (ECB) is also expected to remain on hold at their Thursday meeting. Inflation is trending lower in Europe, which may provide them with enough comfort to begin guiding towards rate cuts soon.
▪ A health-check on the labour front for both the US and Canada will be released Friday.
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