Canada – In June, wholesale trade grew 1.3% to $55.3 billion. Five of the seven broad subsectors (representing 86% of total sales) registered gains, led by motor vehicle and parts (+3.0%) and personal and household goods (+2.2%). Farm product and miscellaneous contracted 2.6% and 1.7%, respectively. Inventories were up 1.1%, though the inventory-to-sales ratio remained unchanged. In real terms, wholesale trade swelled 1.1% and manufacturing sales increased 0.5%, suggesting that the Canadian economy was back in expansion mode after receding for a fifth consecutive month in May.
Retails sales rose a robust 0.6% in June, easily beating the consensus estimate calling for a 0.2% increase. Most sectors were up on the months with notable increases in discretionary goods such as electronics (+9.4%), sporting goods (+1.3%) and furniture (+0.5%). Auto sales took a break (-0.1%) following a surge in the two previous months. Discretionary spending was up 0.4% in June. In volume terms, retail sales were flat on the month. Currency depreciation is having a significant impact on Canadian retail sales: nominal sales were up 7.8% during in Q2 vs. only 1.6% for volume sales (-1.5% in Q1). The 6.1% surge in retail prices in Q2 was the largest quarterly increase in over a decade. We view the flat June reading on volume sales as a disappointment. Though we expect volume sales to pick up in the coming months on the back of tax relief (enhanced family allowances).
The consumer price index rose 0.1% in July, allowing the year-on-year inflation rate to accelerate three ticks to 1.3% (from 1.0%). In seasonally adjusted terms, CPI rose 0.2%, with gains in 6 of the eight broad categories: clothing/footwear (+0.6%), transportation (+0.4%), shelter (+0.2%), health/personal care (+0.2%), household operations (+0.1%) and alcohol/beverage (+0.1%). Prices were flat for recreation/education and food.
The core CPI, which excludes eight of the most volatile items, was flat (but up 0.2% in seasonally adjusted terms), causing a one-tick increase in the year-on-year core inflation rate to 2.4% (from 2.3%). The Canadian CPI data was essentially in line with expectations. Despite weak economic growth, the core inflation remains high on an historical basis. The year-overyear rate is at 2.4% while the 3-month change annualized is even higher at 2.6%. However, this should not be a concern for the Bank of Canada given deflationary international developments. Weakness in commodity prices will put downward pressure on headline inflation while sinking Asian currencies could mean lower price for imported goods. We expect core inflation to moderate in the further months.
United States – In August, the New York Fed’s Empire State Manufacturing Index plunged to -14.9, its lowest point since the 2009 recession. Both shipments and new orders dropped into negative territory, registering their sharpest declines in years. Employment, for its part, remained in positive territory. In contrast, the Philadelphia Fed Manufacturing Index sprang to a consensus-topping 8.3, up from 5.7 in July. However, the sub-indexes sent a mixed message, with shipments and employment rising, and new orders slipping a tad (while remaining in expansion territory). The flash manufacturing purchasing manager’s survey index by Markit Economics fell to 52.9 in August, compared to last month final estimate of 53.8. Despite the decline, the index remained in expansion territory.
To Read the Entire Report Please Click on the pdf File Below