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Consumer prices, driven primarily by a steady decline in the prices of energy products, specifically gasoline, fell by 0.8% year over year in August following declines of 0.9% in July and 0.3% in June.
Other contributors to this drop include the shelter component of the Consumer Price Index, which declined by 2.2% year over year primarily due to declines in house prices and in mortgage interest costs.
Heading into the final quarter of 2009, leading economic indicators on both sides of the border appear to be sending a similar message.
As noted in a previous Snapshot (#73), the outlook for the U.S. is considerably stronger than it was just two months ago, a view reinforced by the latest Conference Board U.S. Index of Leading Indicators, which in August recorded its fifth consecutive monthly increase.
Canadian industries, facing slumping domestic and foreign demand for their output, saw their operating rate fall from 70.2% to 67.4% in the second quarter of 2009.
The nation’s retail sales numbers for July were released this morning by Statistics Canada. The results were a little disappointing. Versus June, the percentage change for total retail sales was -0.6%. Versus July of last year, the change was -4.9%. On a three-month moving average basis, they were -4.8% year over year. The biggest reason for the moderation in retail sales was lower gasoline prices. According to the latest Consumer Price Index (CPI) report, gasoline prices fell 28.3% year over year in July.
While there are plenty of signs that the combination of record low interest rates and a large increase in government spending is helping to boost demand for big ticket items such as houses and cars, there have only recently been some signs of a rebound in job creation. This has given rise to fears of a “jobless” recovery. Two recent reports suggest that this situation is changing.
Inflation continues to be no problem in either the United States or Canada. In fact, what is taking place is exactly what one would expect. There is convergence occurring between all-items year-over-year prices and core inflation rates. That is because world commodity prices – especially the global price of oil – were at their peak in July of last year. They started to fall after that, all the way through February of this year, and therefore year-over-year comparisons, simply due to the mathematical calculation, will gradually ease.
If Canada’s GDP is to grow in the third quarter of this year, it will have to do so without the help of a merchandise trade surplus in its first month, July. The goods trade deficit with the world on an annualized basis in July was -$17.1 billion (CDN). Meanwhile, the U.S. trade deficit in goods and services is starting to creep back up again. In the latest month (July), it was nearly -$400 billion (USD). For both countries, however, it may be encouraging news that some firms and individuals have the wherewithal to buy abroad again.
Given the fact that Montréal’s unemployment rate, 9.6% in August, is just a shade below the national average (9.7%), it is clear that the city’s economy has been hard hit by recessionary conditions that have enveloped the country.
The accompanying table records the 10 largest construction project starts in Canada in June 2009. Also included is the latest trend graph on starts. This looks at 12-month moving totals of the two major non-residential building categories in Canada − total ICI starts and engineering work. ICI stands for industrial, commercial and institutional.
In June, the Organisation for Economic Co-operation and Development (OECD) stated “a recovery is likely to be weak and fragile, and the economic and social damage caused by the crisis will be long-lasting.”