This week's mortgage market update contains:
- Market outlook positive
- Paulson aims to keep U.S. dollar strong
- Flat growth could ensure rates on hold
This week's highlights:
- Canadian Consumer Price Inflation Moderates in June
- US Growth Slows in Q2
This week's Quote:
Those who dream by day are cognizant of many things which escape those who dream only by night. - Edgar Allan Poe
Weekly Articles of Interest
Market outlook positive
JAMES DALZIEL
Aug 2, 2006 08:42 | thestar.com
data pointed to a weakening economy coupled with rising inflation. U.S.
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Paulson aims to keep U.S. dollar strong
MARTIN CRUTSINGER
Aug 2, 2006 06:49 | Toronto Star
down so sharply it could destabilize the U.S. economy. While America's
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Flat growth could ensure rates on hold
STEVEN THEOBALD
Aug 1, 2006 07:10 | Toronto Star
Canada's economy stalled unexpectedly in May, capping a three-month ..... . "The Canadian economy has lost some steam." The 1.5 per cent drop ..... the economy's underlying pace, but it does show that Canada is equally
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This Week's Highlights
- Canadian Consumer Price Inflation Moderates in June
- US Growth Slows in Q2
The US economy slowed markedly in the second quarter with GDP growth decelerating to a 2.5% annualized rate, weaker than the median expectation of 3.0% and well below the robust 5.6% pace seen in Q1. Final sales growth slowed to a 2.1% annual rate in the second quarter after growing 5.6% in the first, making the report even more disappointing than the headline number suggests.
Canadian GDP in May was unchanged after rising a meager 0.1% in each of the preceding months. The weakness largely reflected an unexpected 0.5% drop in goods-producing industries though service-producing output was only up a modest 0.2%. The final source of downward surprise in goods production was the 1.2% drop in construction activity. Declining housing starts from a Q1 peak had raised the possibility of weakness in residential construction which was in fact realized falling 3.7% in the month. With all the anecdotal reports of strong investment activity particularly in the energy sector out West, a significant offset was expected in non-residential construction. However, the report showed this area of construction fell as well though by a more moderate 0.5%.
Looking ahead, it is not expect that the recent environment of minimal growth will continue. For one, the weakness in energy production should reverse near term as the closures end. As well, it is expected that the strong profit growth in a number of commodity-producing sectors will boost both construction and service-producing sectors. However, even if GDP growth was to jump higher in June, it would still only imply Q2 growth about one-half of the annualized Q1 gain of 3.8%. This represents clear downside risk to our current Q2 monitoring of 2.5%. As always, we will keep our ear to the ground and make you aware of developments as they occur.
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