HIGHLIGHTS OF THE WEEK – July 21
Economic data came in mixed this week. Weakness was most apparent in housing with starts and permits both declining despite a pick-up in homebuilder confidence. Industrial production disappointed, while regional manufacturing surveys for the New York and Philly districts improved. Retail sales missed expectations, but revisions to previous months offset some of the weakness.
Taken in context with the Fed Chair’s semi-annual testimony to Congress, assuring investors of continued central bank support, the economic data led domestic markets to all-time highs by Thursday morning. However, the mood soured substantially in light of the tragic downing of a Malaysian airliner over eastern Ukraine, with volatility and safe-haven demand rising.
It was all about inflation this week in Canada, as prices heated up again in June. Total inflation now sits at 2.4%, lifted by higher prices primarily for food and energy. The Bank’s core inflation measure now sits at 1.8%, still below the 2% target.
However, the Bank of Canada’s latest quarterly Monetary Policy Report stressed that much of the recent run up in inflation is due to transitory factors. It expects inflationary momentum to ebb next year as these factors cease, and underlying economic momentum is weaker than previously thought.
In contrast, low interest rates continue to fuel Canada’s housing market in June, with sales up 11% year-on-year. TD Economics expects reduced affordability and an increase in supply to weigh on prices later this year, but the June data underscore that household imbalances remain a risk that the Bank is watching closely.
For further information, please contact:
John Maveety Manager, Residential Mortgages – Greater Ottawa Area TD Canada Trust
T: (613) 371-1984 F: (888) 899-1984 P: (866) 767-5446