Market News: Week Ending September 4, 2026

Market News: Week Ending September 4, 2026

The Institute for Supply Management reported that its Purchasing Managers Index moved down to 54.6 in August, lower than July’s 55.6 reading. Regardless, this was the eighth consecutive posting above the key 50.0 (generally expanding) level. With the market looking for a smaller move down, this reading is somewhat weaker than consensus expectations but indicates reasonably stable growth in U.S. manufacturing activity. 

The Bank of Canada announced that it was holding administered interest rates steady once more at the conclusion of its latest monetary policy meeting. The announcement leaves the target range for overnight borrowing at 2.25% to 2.50% with the official, benchmark Bank Rate at 2.50%. The Bank also maintained the official Deposit Rate at 2.20%. This is the seventh consecutive “on hold” announcement and leaves administered interest rates at their lowest level since July 12, 2022. Rate cuts between June 2024 and October 2025 resulted in a total reduction of 275 basis points (a basis point is 1/100th of one per cent). The Bank statement highlighted the continued concerns over inflation (CPI was up 3.0% y/y in July). Specifically, “the longer that high oil prices and elevated refinery margins persist, the greater the risk of spillover to the prices of other goods and services”. Interestingly, the recent population decline (the first material decline since standard data have been available (1946)) was not mentioned. Considerable uncertainty remains, fueled by both the conflict in the Middle East and broader changes in international trading patterns. The market will likely remain cautious in setting its expectations for the next policy announcement scheduled for October 28, 2026. 

Coming on the heels of last week’s announcement of a Canadian rebound in GDP, Statistics Canada reported that labour productivity of Canadian businesses rose 4.0% (annualized) in the second quarter of 2026, as business output increased despite an actual decline in hours worked. This productivity gain follows a revised 1.4% decline (originally reported as -2.0%) in the first quarter of 2026. Productivity figures were revised upward going back to the first quarter of 2025. Regardless, since the end of 2014 (46 quarters), productivity has declined in 24 of these quarterly observations. For comparison, between the end of 2014 and the first quarter of 2026, the U.S. has recorded a cumulative 23.6% advance in productivity. Meanwhile, Canada has now posted just a 5.3% gain over the same period. Rising productivity represents a clear competitive advantage as it allows an improving standard of living with both higher wages and faster economic growth, but without inflationary pressures. The release did not address the growing trend of lower Canadian population figures (three consecutive quarters – the first time since consistent data were first published in 1946), which is potentially reflected in the lower hours worked. High-productivity individuals leaving the country would be problematic for the broader economy. During the first quarter of 2026, Canadian unit labour costs rose 2.4% on an annualized basis and stand with a year over year gain of 3.2%. This is above the pace of overall inflation (3.0% in July). This release is stronger than the market consensus. 

Statistics Canada announced that, in July, Canada's merchandise exports decreased 2.3% while imports rose 2.2%. As a result, Canada's merchandise trade balance with the world narrowed to a surplus of $0.8 billion from a revised $4.2 billion in June (previously reported as $3.9 billion). Exports to the United States dropped 6.6% in July. Meanwhile, imports from the United States rose 1.8% in July. As a result, Canada's trade surplus with the United States narrowed from $10.3 billion in June to $5.9 billion in July. StatsCan simultaneously released the services trade results and a surplus of $0.3 billion was recorded in July. It is widely expected that these figures will continue to fluctuate as international trade remains unsettled. The combined, total trade surplus will be a positive sign for overall GDP growth in the fourth quarter. 

The U.S. Census Bureau announced that the country's international trade deficit in goods and services stood at $88.6 billion in July, much wider than the $71.2 billion gap for June. July exports were $310.7 billion, $6.6 billion less than June exports. July imports were $399.3 billion, $10.8 billion more than June imports. A narrower trade deficit was anticipated, but this was considerably larger than market expectations. 

The U.S. Department of Labor announced that initial jobless claims totalled 206,000 (seasonally adjusted) in the week ending August 29, an increase of 2,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 203,000 to 204,000. The 4-week moving average was 207,250, an increase of 1,500 from the previous week's revised average. The previous week's average was revised up by 250 from 205,500 to 205,750. These results are in line with market estimates. 

The U.S. Bureau of Labor Statistics announced that the unemployment rate held steady at 4.1% in August. At the same time, non-farm payrolls were reported as increasing by 162,000 during the month, following the revised 21,000 advance now reported for July (originally posted as -23,000). During August, average hourly earnings climbed 0.3% to stand with a year-over-year advance of 3.1%; slightly below headline inflation (3.4% in July). This report was stronger than consensus estimates. Coupled with still elevated inflation, this will prompt further market debate on the future direction of Fed policy given the current ‘on hold’ position. The next meeting is scheduled for September 15 and 16. This is the most closely followed set of U.S. statistics as it indicates the relative health of the various sectors of the economy and is suggestive of consumer spending.

 

Statistics Canada announced that overall employment dropped by 41,700, partially reversing the 75,100-advance reported in July. The recent swings in employment have left the cumulative gains, thus far in 2026, at just 27,100. At the same time, the overall unemployment rate was steady at 6.4%, as the labour force reported an outright decline (36,800). Despite the August jobs decline, the annual rate of job growth stood at 1.0%. Running counter to the broader trend of Canada’s declining overall population, this report showed that the working aged population (15 yrs+) increased by 19,100 in August. This pushed the participation rate (the percentage of working age individuals who were either working or looking for work) down to 65.0%. This is only marginally higher than the cyclical low (64.9% March 2026) and is far below the pre-pandemic peak of 67.3%. This indicates there are now 809,000 potential workers still on the sidelines compared to 95,000 at the end of 2010. A return to 67.3% participation would produce a more realistic unemployment rate of 9.7% - consistent with a recession. Regardless, the headline results were weaker than market expectations, but stubbornly high inflation (3.0%) has many market participants looking for the Bank of Canada to begin hinting at interest rate hikes. The next monetary policy announcement is scheduled for October 28.

Note:
All index performance is in Canadian dollars.

IMPORTANT DISCLAIMERS
The information in this letter is derived from various sources, including CI Global Asset Management, CRA, Bloomberg, National Post, Globe and Mail, Wall Street Journal, Bloomberg, Reuters, Investment Executive, Advisor.ca, MarketWatch, Toronto Sun, The Guardian, MSN.ca and Statistics Canada at various dates. This material is provided for general information and is subject to change without notice. Before acting on any of the above, please contact me for individual financial advice based on your personal circumstances. Certain statements contained in this communication are based in whole or in part on information provided by third parties and CI Global Asset Management has taken reasonable steps to ensure their accuracy. Market conditions may change which may impact the information contained in this document.