What to expect in the week ahead

By Staff | January 25, 2019 | Last updated on January 25, 2019
2 min read

In the coming week, expect some underwhelming GDP figures for Canada and, in the U.S., a central bank that stands pat on rates.

Canada’s key economic release, November GDP, lands on Thursday (Jan. 31) and likely won’t match the 0.3% growth seen in October.

“Retailing, wholesaling and manufacturing activity all declined during the month,” says director and senior economist Royce Mendes in a weekly report from CIBC. “As a result, the October acceleration in growth now looks fleeting.”

On the plus side, utilities should provide a boost to growth because of lower-than-seasonal temperatures, says a weekly report from National Bank.

Overall, though, National Bank expects a 0.2% decline in monthly GDP. CIBC is slightly less pessimistic with its call of -0.1%, which could translate to roughly 1% GDP growth for the final quarter of 2018, its report says. GDP growth was 2% in the third quarter. For 2018, CIBC and National Bank both call for GDP growth of 2.1%.

In the U.S., the government shutdown will likely delay fourth-quarter GDP numbers, but economists are looking at January employment data to be released Friday.

Because of the shutdown, the unemployment rate might be temporarily higher, says the CIBC report, which calls for a rate of 4%, a tick above the previous month. It also calls for 174K added jobs and an increase of 0.2% to average hourly earnings—both down from the previous month. The bank’s call for wage growth would be bearish for the U.S. dollar and bullish for fixed income, the report says.

For the months ahead, underlying momentum in the U.S. economy suggests room for “continued, healthy employment gains,” the report says. For example, the prime-age employment-to-employment ratio is below pre-recession levels, so labour slack remains.

As a result of that slack, the Federal Reserve should be “comfortable in taking a pause on raising rates until Q2,” the report adds. The Federal Reserve makes a rate decision on Wednesday, and consensus is almost 100% that a pause is in order.

Finally, on the world stage, trade tensions will continue to be monitored. The National Bank report says China’s vice-premier Liu He travels to Washington next week to discuss trade relations with U.S. Trade Representative Robert Lighthizer.

For full details, read the CIBC report and National Bank report.

Advisor.ca staff

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.