The U.S. economy continues to flourish, despite recent stock market volatility. The latest growth estimates show real GDP advancing at a 3.9% annualized rate in the 2nd Quarter. Long-term unemployment declined by 779,000 over the past year and job openings are at the highest level since the first time this data was collected 15 years ago. This will soon translate into wage increases. As such, the consumer sector is expected to be the main economic driver in the U.S. in coming months.
Despite a localized recession in the commodity sector, Canada’s economy is growing. The Bank of Canada is forecasting real GDP growth of 1.5% at annual rates in the 3rd Quarter. The psychological boost this could provide to the CAD may allow for modest gains up to the 75 to 76 cent (U.S.) range.
Ontario and B.C. will be Canada’s growth leaders this fall and in 2016. Exchange rate-sensitive non-commodity exports are finally benefitting from the competitive advantage of a lower CAD. Non-commodity capital spending will result. Job growth, retail sales, housing construction and non-residential construction in these provinces are also creating positive momentum. Toronto, in particular, has become Canada’s “poster city” for economic growth.
Lower gasoline prices continue to benefit both consumers and the manufacturing sector. Prices will likely remain low, but shouldn’t face more dramatic decreases. U.S. crude oil production is forecast by the EIA to continue to decline through to mid-2016 and Canadian oil and gas output is down 9% from 2014. The WTI crude oil price could increase into the low $50/bbl range in early 2016, but options contracts continue to point to a high level of oil price volatility.
In both Canada and the U.S., the housing industry, on a whole, has been thriving. Although there has been a sharp drop in single-detached housing starts in the Prairies, the national total for housing starts in Canada has actually surged to its highest level in 3 years. Declines in government bond yields are having a big effect on housing demand in both countries.
Globally, there is a slow uptrend in Euro Area industrial production but Chinese manufacturing is at its weakest in 6-1/2 years.
U.S. job openings hit record high as labor market tightens
Canada’s economy puts recession behind it with second straight month of growth
EIA: US crude output declines to continue through mid-2016
Canadian housing starts jump as Toronto condo building booms