The week in review - Jan. 19th 2024

THIS WEEK’S RECAP:

 

The Bank of Canada's Business Outlook Survey for the fourth quarter of 2023 reveals a trend towards normalization in pricing behavior, although prices are still increasing more frequently than before the pandemic. Businesses are experiencing less favorable conditions, reflected in declining sales volumes and a dampened outlook for future sales. Additionally, high interest rates are impacting firms, leading to modest investment plans and weaker hiring intentions.

 

In December, Canada's inflation rate (Consumer Price Index), increased to an annualized rate of 3.4%. Though directionally, higher prices are a concern, the Bank of Canada may minimize the significance of these figures, attributing them to base effects that have led to considerable adjustments on a year-over-year basis. The persistent issue of shelter costs, exacerbated by limited housing supply, remains problematic. The BoC can influence mortgage interest costs by lowering rates, but supply is a government issue that will take some time to resolve. The timing of rate cuts remains a delicate dance for central bankers, with the risk of reigniting inflation very high on their minds.

 

The Empire State (New York) manufacturing survey for December indicated a significant downturn, with historic lows in several indices such as new orders and shipments, reflecting some of the weakest activity since the survey's inception barring the initial pandemic period. While employment showed a slight improvement, it remained in negative territory, and the overall composite figure also declined. However, there was a silver lining as future expectations saw some positivity. We monitor various regional data points like this for early signals of a possible shift in economic trends.

 

China's GDP growth in Q4, reaching +5.2% year-on-year, met overall expectations. There was a slight increase in industrial production and a rise in fixed asset investment growth, contrasted by a decrease in retail sales growth. While recent announcements indicate potential for additional economic support, the decision to maintain the medium-term lending facility (MLF) rate unchanged this week casts doubt on the extent and timing of any future economic stimulus measures.

 

 

ON DECK FOR NEXT WEEK:

 

On Wednesday, the Bank of Canada will provide guidance on its monetary stance and publish its Monetary Policy Report (MPR), which will offer updated forecasts for various economic indicators, including the economy, inflation, and the labor market, among others.

 

In the US, an advance reading of Q4 GDP will be released Thursday. Also of importance, December's Personal Consumption Expenditure Price Index (PCE), a key inflation indicator used by Fed officials, will be updated Friday.

 

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IMPORTANT DISCLAIMERS

 

This document is provided as a general source of information and should not be considered personal, legal, accounting, tax or investment advice, or construed as an endorsement or recommendation of any entity or security discussed. Every effort has been made to ensure that the material contained in this document is accurate at the time of publication. Market conditions may change which may impact the information contained in this document. All charts and illustrations in this document are for illustrative purposes only. They are not intended to predict or project investment results. Individuals should seek the advice of professionals, as appropriate, regarding any particular investment. Investors should consult their professional advisors prior to implementing any changes to their investment strategies. 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. CI Global Asset Management is a registered business name of CI Investments Inc. © CI Investments Inc. 2024. All rights reserved.