Market Updates

Your weekly commentary – For the week ended April 21

Global equity markets were shaky over the week as investors considered soft economic data and how it might affect U.S. Federal Reserve Board decisions. Meanwhile, earnings reports were met with mixed reactions. The S&P/TSX Composite Index ticked higher over the week. The S&P 500 Index in the U.S. finished lower. Oil and gold prices dropped. The yield on the 10-year Government of Canada bond declined over the week. More moderation in Canadian inflation Canada’s inflation rate was 4.3% in March, matching expectations and slowing significantly from February’s 5.2% rate. The slowdown came partly due to a high base year in March 2022, when oil prices surged higher at the onset of Russia’s invasion of Ukraine. A sharp decline in gasoline prices and lower food and shelter costs drove the easing rate. Inflation in Canada is easing, moving closer to the Bank of Canada’s 2023 mid‑year projection, suggesting their rate pause was warranted. Canadian households pull back on spending Retail sales in Canada fell by 0.2% in February, following January’s 1.4% increase. However, the decline was not as steep as Statistics Canada’s (“StatsCan”) preliminary estimate. A drop in sales at gasoline stations and food and beverage retailers contributed to February’s decline. Conversely, sales rose for motor vehicles and parts. Tighter financial conditions appear to be weighing on Canadian households, prompting a slump in retail sales. StatsCan estimates retail sales fell again in March, this time by 1.4%. China’s economic growth tops expectations China’s economy expanded in the first quarter of 2023, the fastest since the first quarter of 2022. It rose by 4.5% year-over-year, exceeding the 4.0% rate of growth economists expected. Economic activity was boosted by the government’s removal of its strict COVID‑19 lockdown restrictions and resulted in stronger household consumption. China also reported retail sales rose by 10.6% year-over-year in March, the strongest growth since June 2021. Meanwhile, industrial production advanced 3.9% year-over-year, its fastest rate of annual growth since October 2022. The result could put China’s economy on track to meet the government’s 5% target for 2023. U.K. economic data points to more rate increases The Bank of England (“BoE”) may be considering more rate increases amid still high inflation and a relatively strong labour market. The U.K. inflation rate was 10.1% in March, down from February but above 10% for the seventh straight month. The rate is still well above the BoE’s 2% target. The U.K. labour market remains relatively robust. The economy continued to add jobs in February, while the unemployment rate was relatively unchanged. Wage pressures remained elevated, showing signs of a still-tight labour market. The BoE holds its next rate announcement on May 11.