A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Wednesday’s report on domestic retail sales wasn’t quite as bad as the top-line number looked, but they were still weak enough that National Bank economists believe the Canadian economy actually contracted in November,
“Canadian November GDP tracking -0.2%: November’s poor retail numbers could hardly be described as a surprise considering the sharp drop in gasoline prices in the month and the weakness in auto sales. Still, the broad-based nature of the slump is a cause for concern. Sales did indeed retrace at gasoline stations and auto dealers, but they also dropped in 4 other categories, representing 37.5% of total outlays. What’s more, retail volumes fell for the fifth time in the last six months, perhaps a sign that Canadian consumers may be negatively impacted by higher interest rates. For the month of November, declining volumes could translate into a negative contribution to GDP, which is scheduled for release next Thursday.”
BMO economist Doug Porter noted that in light of solid population growth, the retail sales data is even more alarming,
“With interest rate hikes and other measures weighing on housing and big-ticket spending, real retail sales have in fact slipped into reverse in the past year. After a near-6% surge in ‘17, sales volumes were barely above water for all of ’18, and were down y/y in Q4. Given strong population growth rates, that means spending per person is falling fast.”
November is only one month, and growth could strengthen but economic momentum is certainly pointed in the wrong direction.
“@SBarlow_ROB NBF: November Cdn GDP tracking -0.2 per cent” – (research excerpt) Twitter
“(BMO): " Given strong population growth rates, that means [Cdn] spending per person is falling fast” – (research excerpt) Twitter
“Canadian dollar hits two-week low as some economists see Nov GDP decline” – Report on Business
“Delinquencies on Canadian lines of credit tell an intriguing tale” – Report on Business
See Also: “@C_Barraud 🇪🇺 EUROZONE PMIs: “Exports fell for a fourth successive month, dropping at the steepest rate since comparable data for combined manufacturing and services exports were first available just over four years ago” – Twitter
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A deputy governor at the Bank of England provided some consolation for the disturbing Canadian economic data by arguing that mortgage debt is not that big a deal for economic growth, and there is little relationship between household debt to income ratios and financial distress,
“[Ben Broadbent] begins by highlighting the weak relationship between level of mortgage debt, compared to incomes, just before the financial crisis, and subsequent distress. He then compares the same measure of distress with loan growth, and finds a much stronger relationship… it is an error to think about debt in absolute levels, divorced from nuances like affordability and growth over time. But it is also an error to think about debt, divorced from the guilds and bureaucracies that strategically deploy it.”
“Are we thinking about debt in the wrong way?” – FT Alphaville (free to read with registration)
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I feel CNBC’s Pete Najarian pain. North American equity markets are largely trendless at the moment and extremely difficult to trade,
‘“It’s difficult right now to find out where is the best place to place your money,” Najarian added. Najarian owns 11 options, all expiring in less than two weeks. He said he needs “to see the derivatives market deliver” before he adds anything else. The lack of clear options trading, especially as few have an outlook of more than a month, is keeping Najarian largely on the sidelines.”
“This is one of the toughest markets to trade Pete Najarian has seen in his nearly 30-year career” – CNBC
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Tweet of the day:
Diversion: “Scientists identified a protein in the blood that could predict Alzheimer’s” – Quartz
Scott Barlow