Author: Consultant

While Canada’s economy likely rebounded slightly last month after a widespread contraction in October, the fourth quarter is shaping up to be a weak one as tariff-hit industries weigh on growth.

Industry-based gross domestic product expanded 0.1 per cent in November, according to a preliminary estimate from Statistics Canada, coming on the heels of a 0.3-per-cent decline the month before.

Together, the two months of data suggest that the Canadian economy “has some work cut out to avoid another negative print for the final quarter of the year,” Robert Kavcic, senior economist at BMO Capital Markets, said in a note to clients. “That will close out a very choppy year for Canadian growth in still-choppy fashion.”

While that contraction in October was expected, the breadth of the decline still caught the attention of economists.

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Output fell in many sectors, with manufacturing, which contracted 1.5 per cent, contributing the most to the month-over-month decline.

Within manufacturing, most sectors were flat or down, with the biggest declines coming in trade-dependent industries such as electrical equipment, machinery and wood-product manufacturing.

The latter has been hit particularly hard, with output from wood-product manufacturers shrinking 7.3 per cent in October.

Canada’s softwood lumber sector has sounded the alarm that producers face enormous challenges during a period of high U.S. import taxes, warning of widespread effects on the communities and employees that depend on mills.

U.S. import taxes on softwood currently total 45.16 per cent on most Canadian producers, including anti-dumping and countervailing duties of 35.16 per cent and new tariffs of 10 per cent. The duty rates were 14.4 per cent previously.

U.S. President Donald Trump announced the tariffs on lumber and other wood products in late September against Canada and other countries, effective Oct. 14. He cited Section 232 of the U.S. Trade Expansion Act, which allows him to invoke national-security concerns to impose tariffs.

Education services also added to the monthly output drop in October, but that was largely owing to the teachers’ strike in Alberta.

The monthly GDP numbers paint a picture of an economy steadily losing steam. Compared with a year ago, real output in October grew just 0.4 per cent, Mr. Kavcic noted, the slowest pace since the pandemic.

Even so, Canada has shown more resilience this year than many economists expected. In the third quarter, covering July to September, Canada’s real expenditure-based GDP came in at a surprisingly strong annualized rate of 2.6 per cent.

The same goes for the U.S. economy, which beat expectations to grow by 4.3 per cent in the third quarter, the biggest gain in two years, new numbers released Tuesday show.

Households were a big driver of that growth, despite tariffs raising the prices of some goods, with U.S. consumption climbing at a 3.5-per-cent annualized rate in the quarter.

“Even as consumption take the reins back from investment, the economy maintains considerable momentum,” Paul Ashworth, chief North America economist at Capital Economics, said in a note to clients.

However, growth in the U.S. is also expected to slow in the fourth quarter because of the 43-day government shutdown.

It’s unclear yet how the latest data will sway central bank interest-rate decisions in either country.

The Bank of Canada held its benchmark policy rate at 2.25 per cent earlier this month, with Governor Tiff ‌Macklem citing the country’s resilience to U.S. tariffs and an inflation rate close to the bank’s 2-per-cent target.

Strong job growth in Canada has been a marker of that resilience. Last month employers added 54,000 new jobs, which sent the unemployment rate down 0.4 percentage points to 6.5 per cent. It was the third consecutive month of employment gains.

Still, it’s unclear how long Canada’s job market resilience can hold. The “unimpressive rebound” in November’s monthly GDP stands in contrast with a robust jobs report for that month, “suggesting that the labour market data may weaken again ahead,” Andrew Grantham, a senior economist with CIBC Capital Markets, said in a note to clients.

Statistics Canada says total manufacturing sales fell 1 per cent to $71.5-billion in October.

The agency says sales were down in 11 of the 21 subsectors it tracks as sales of chemical products fell 6 per cent.

Meanwhile, sales in the wood product subsector fell 9 per cent as wood product manufacturing in Canada were affected by U.S. tariffs.

Transportation equipment subsector sales dropped 2.3 per cent in October as the production of aerospace product and parts industry group posted the largest decrease at 6.3 per cent.

The motor vehicle industry group, which is also included in the transportation equipment subsector, saw sales fall 2 per cent.

In real terms, Statistics Canada says overall manufacturing sales fell 1.5 per cent in October.

Canada’s annual inflation rate was 2.2 per cent in November, unchanged from the previous month, driven primarily by an increase in food prices which rose at their fastest pace in more than two years, Statistics Canada said on Monday.

A year-on-year drop in the costs of gasoline and shelter partially offset the rise in food prices, the statistics agency said.

It was the first month since March that core measures of inflation, which strip out volatile items, came in below 3 per cent, the upper end of the Bank of Canada’s control range.

Analysts polled by Reuters had forecast annual inflation of 2.3 per cent.

November’s monthly inflation matched analysts’ estimates of 0.1 per cent, down from 0.2 per cent in October, Statscan said.

Canada’s annual inflation has been subdued since April due to the removal of a carbon levy on the sale of gasoline. This has kept the price of the fuel low on a year-on-year basis, helping contain overall inflation.

Statscan’s data showed that the price of gasoline was up 1.8 per cent in November when compared with October, but on an annual basis it was 7.8-per-cent lower.

Without the effect of gasoline, November’s CPI was 2.6 per cent.

Food prices continued to rise, with economists pointing to them as one of the most significant drivers of inflation, which has proven sticky despite big cuts in interest rates by the central bank.

Food prices overall rose by 4.2 per cent on a yearly basis in November, the biggest increase since December 2023, spurred by a 4.7-per-cent rise in grocery prices and a 3.3-per-cent increase in the cost of food purchased from restaurants, Statscan said.

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Adverse weather conditions in growing regions and President Donald Trump’s import tariffs are considered to be driving up food prices, Statscan said.

The Bank of Canada’s preferred measures of core inflation – CPI-median and CPI-trim – had hovered around 3 per cent since April when Trump’s tariffs started to take effect.

CPI-median, the centermost component of the CPI basket, edged down to 2.8 per cent in November from 3 per cent in the prior month. CPI-trim, which excludes the most extreme price changes, was also at 2.8 per cent last month from 3 per cent in October.

The Canadian dollar firmed slightly after the data, trading up 0.07 per cent to 1.3761 to the U.S. dollar, or 72.67 U.S. cents. Yields on Canada’s two-year government bonds were down 2.3 basis points at 2.486 per cent.

Monday December 15

China retail sales, industrial production and fixed asset investment

Euro zone industrial production

(5 a.m. ET) Canada’s existing home sales and average prices for November. Estimates are year-over-year declines of 11.0 per cent and 2.5 per cent, respectively.

(5 a.m. ET) Canada’s MLS Home Price Index for November. Estimate is a year-over-year drop of 3.5 per cent.

(8:15 a.m. ET) Canadian housing starts for November. Estimate is an annualized rate rise of 11.7 per cent.

(8:30 a.m. ET) Canadian CPI for November. The Street expects gains of 0.1 per cent from October and 2.3 per cent year-over-year.

(8:30 a.m. ET) Canada’s manufacturing sales and new orders for October. Estimates are month-over-month declines of 1.1 per cent and 1.5 per cent, respectively.

(8:30 a.m. ET) U.S. Empire State Manufacturing Survey for December.

(10 a.m. ET) U.S. NAHB Housing Market Index for December.

Earnings include: Mainstreet Equity Corp.

–

Tuesday December 16

China PMI

Euro zone PMI and trade surplus

(8:30 a.m. ET) U.S. nonfarm payrolls for November. The Street expects an increase of 50,000 from October with the unemployment rate rising 0.1 per cent from the last reading of 4.4 per cent in September and average hourly wages up 3.6 per cent year-over-year. The data from October will also be released following the government shutdown.

(8:30 a.m. ET) U.S. retail sales for October. Consensus is a rise of 0.2 per cent month-over-month.

(8:30 a.m. ET) U.S. housing starts for November.

(8:20 a.m. ET) U.S. building permits for November.

(9:45 a.m. ET) U.S. S&P Global PMIs for December.

(10 a.m. ET) U.S. business inventories for September.

(12:45 p.m. ET) Bank of Canada Governor Tiff Macklem speaks in Montreal (with press conference to follow)

Earnings include: Lennar Corp.; OrganiGram Holdings Inc.

–

Wednesday December 17

Japan trade balance and core machine orders

Euro zone CPI and labour costs

Germany business sentiment

(8:30 a.m. ET) Canada’s international securities transactions for October.

Earnings include: Asante Gold Corp.; General Mills Inc.; Micron Technology Inc.; Transat AT Inc.

–

Thursday December 18

Bank of Japan monetary policy meeting (through Friday)

Bank of England monetary policy meeting

ECB monetary policy meeting

(7 a.m. ET) Canada’s CFIB Business Barometer for December.

(8:30 a.m. ET) Canada’s job vacancy rate for October.

(8:30 a.m. ET) U.S. CPI for November. The Street expects a rise of 0.3 per cent from October and up 3.1 per cent year-over-year.

(8:30 a.m. ET) U.S. initial jobless claims for week of Dec. 13. Estimate is 225,000, down 11,000 from the previous week.

(8:30 a.m. ET) U.S. Philadelphia Fed Index for December.

(8:30 a.m. ET) U.S. current account deficit for Q3.

(10 a.m. ET) U.S. leading indicator for November.

Earnings include: Accenture PLC; BlackBerry Ltd.; Cintas Corp.; FedEx Corp.; Nike Inc.

–

Friday December 19

Japan CPI

Euro zone economic confidence

Germany consumer confidence

(8:30 a.m. ET) Canadian retail sales for October. The Street expects a flat reading month-over-month.

(8:30 a.m. ET) Canada’s new housing price index for November. Estimate is a decline of 0.2 per cent from October and down 2.1 per cent year-over-year.

(8:30 a.m. ET) Canadian household and mortgage credit for October.

(10 a.m. ET) U.S. existing home sales for November.

(10 a.m. ET) U.S. University of Michigan Consumer Sentiment Index for December.

Earnings include: Carnival Corp.; Paychex Inc.

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What we are t

Empire Co. Ltd. says it earned $159 million in its latest quarter, down from $173 million in the same quarter last year. The company behind Sobeys says its profit amounted to 69 cents per diluted share for the quarter ended Nov. 1 compared with a profit of 73 cents per diluted share a year earlier. Sales for what was the company’s second quarter totalled $8.0 billion, up from $7.8 billion in the same quarter last year. Same-store sales were up 2.0 per cent, while food same-store sales rose 2.5 per cent. Empire also announced the appointment of Jo Mark Zurel to the company’s board of directors. Zurel is chair of the board at Fortis Inc. and also serves on the boards of Major Drilling Group International Inc. and Highland Copper Company Inc

• The S&P 500 and Dow Jones Industrial Average notched fresh highs.
• Disney to invest $1 billion in OpenAI and will license the startup its characters.
• SpaceX will launch IPO in 2026, Elon Musk confirmed. 
• Broadcom’s fourth-quarter results beat expectations, but shares slumped in extended trading.
• Analysts are re-looking their price targets for Oracle stock.

The S&P 500 and Dow Jones Industrial Average advanced on Thursday, with both hitting fresh closing records. The Russell 2000 index also ended the session at a new high, following the U.S. Federal Reserve’s quarter-point cut on Wednesday.

But if investors analyze Thursday’s individual stock movements, they will see not all is well with the AI play yet. Oracle shares plunged nearly 11% after reporting on Wednesday weak quarterly revenue, dragging down AI-related names such as Nvidia and Micron.

In extended trading, Broadcom shares fell 4.5%. The chipmaker beat Wall Street’s expectations for earnings and revenue, but CEO Hock Tan appeared to have failed to address worries that their largest customer, Google, might eventually make more of its chips in-house. Rising memory prices would also pressure margins, while the company’s chip deal with OpenAI might not be binding.

That’s why the tech-heavy Nasdaq Composite fell 0.26% despite other major U.S. indexes hitting records. Putting the two together, that means investors are rotating out of tech into other parts of the market. The S&P 500 financials sector, for instance, closed at a fresh record, buoyed by jumps in Visa and Mastercard.

Even though the AI theme seems to be under scrutiny, other sectors are performing well on the back of a resilient U.S. economy — as signaled by Fed officials on Wednesday — and buoyed by interest-rate cut. So long as nothing throws a spanner in the works, looks like we’re all set for a happy holiday season.

— CNBC’s Kristina Partsinevelos contributed to this report.

Gold edged lower on Thursday, as traders weighed the U.S. Federal Reserve’s divided vote on a quarter-percentage-point interest rate cut, while silver climbed to yet another record high.

Spot gold fell 0.3% to $4,216.49 per ounce. U.S. gold futures for February delivery gained 0.5% to $4,244.40 per ounce.

“It’s just an overpositioning (in gold) in expectation of the rate cut, which did happen, and therefore you’re seeing some selling pressure,” said independent analyst Ross Norman, adding that gold’s fundamentals remained intact.

The Fed cut interest rates by a quarter of a percentage point on Wednesday in a rare divided vote, but signalled a pause on further easing as officials look ahead to assess the direction of the job market and inflation that “remains somewhat elevated.”

Lower interest rates typically benefit non-yielding assets such as gold.

Projections issued after the two-day meeting showed most policymakers see just one rate cut in 2026. Fed Chair Jerome Powell offered no indication of when another cut might occur.

U.S. President Donald Trump said on Wednesday that the Fed’s rate cut could have been larger. Trump is set to announce the new Fed chair early next year, with White House economic adviser Kevin Hassett seen as a frontrunner.

Investors are now looking out for November’s non-farm payrolls and unemployment rate data, due on December 16, for further clues on the Fed’s next move.

Spot silver rose 0.6% to $62.16 per ounce, after hitting a record high of $62.88 earlier in the session, bringing its year-to-date gain to 115% on strong industrial demand, declining inventories and its addition to the U.S. critical minerals list.

“Silver’s fundamentals remain incredibly positive. There is a phenomenal tailwind with the critical minerals list and the possibility that we might see some stock building,” which would further increase market tightness, Norman added.

Canada posted a small monthly international trade surplus in September, reversing a trend of seven consecutive months of deficits, data showed on Thursday.

It registered a marginal trade surplus of $153-million in September, following a $6.43-billion deficit in the prior month, Statistics Canada said.

This was the first surplus that Canada has posted since President Donald Trump threatened and later imposed tariffs on critical sectors which choked significant exports to the U.S., Canada’s biggest trading partner. The bulk of the surplus was driven by a 44-per-cent jump in Canada’s trade surplus with the U.S., Statscan’s data showed.

The September trade data, which was due in November, was delayed as information for Canadian exports to the U.S. were unavailable due to a 43-day government shutdown in the U.S.

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Analysts polled by Reuters had forecast the trade deficit at $4.5-billion for September. Economists said the trade numbers show that Canada’s international merchandise trade was finally starting to normalize.

“Overall story is really positive,” said Prince Owusu, senior economist with Export Development Canada.

“It seems to suggest that the trade flow with the United States is beginning to stabilize,” he said, adding that the trend of diversification from the U.S. that started is also continuing.

Canada’s total exports in September grew by 6.3 per cent to $64.23-billion, rebounding from a drop of 3.2 per cent in August, and was driven by higher exports in nine out of 11 product sections. This was the largest percentage increase since February, 2024. This was led by U.S. exports that grew by 4.6 per cent and exports to countries other than the U.S. growing by 11 per cent, Statscan said.

Exports of metal and non-metallic mineral products and aircraft and transportation equipment and parts led the gains with over 20-per-cent rise in exports. In volume terms, total exports rose 4.1 per cent, the statistics agency said. Total merchandise imports dropped by 4.1 per cent in September to $64.08-billion.

Exports to the U.S. grew by 4.6 per cent in September to $45.84-billion, helped by outbound shipments of aircraft, light trucks and unwrought gold, Statscan said.

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Exports to the U.S. grew to $45.84-billion from $43.83-billion in August, helped by outbound shipments of aircraft, light trucks and unwrought gold, Statscan said.

The U.S. accounted for over 71 per cent of Canada’s exports in September. Imports from the U.S. declined 1.7 per cent in September, a third consecutive monthly decrease, taking Canada’s trade surplus with the U.S. to its highest level since February.

Higher shipments of unwrought gold, crude oil and aircraft led the jump in exports to countries other than the U.S. Imports from countries other than the U.S. dropped 7.3 per cent. Canada’s trade deficit with countries other than the United States has narrowed sharply, posting the lowest deficit since October, 2024, Statscan said.

The Canadian dollar firmed in early trade and was trading up 0.2 per cent to 1.3767 to the U.S. dollar, or 72.64 U.S. cents. Yields on the two-year government bonds were down 0.2 basis points to 2.524 per cent.

Empire Co. Ltd. EMP-A-T -8.98%decrease says it earned $159-million in its latest quarter, down from $173-million in the same quarter last year.

The company behind Sobeys says its profit amounted to 69 cents per diluted share for the quarter ended Nov. 1 compared with a profit of 73 cents per diluted share a year earlier.

Sales for what was the company’s second quarter totalled $8-billion, up from $7.8-billion in the same quarter last year.

Same-store sales were up two per cent, while food same-store sales rose 2.5 per cent.

RBC analyst Irene Nattel said operating results were in line with forecast, “underpinned by solid merchandising strategies in place to address ongoing value-seeking consumer spending behaviour.”

She said Empire continued to execute on its strategy to maximize revenues in full-service stores despite the broader consumer shift to discount banners, while growing its discount presence.

Newly named chief executive Pierre St-Laurent said the company is looking to set up more storefronts “because we believe we have room to grow.”

“We are underdeveloped in discount, so we will grow discount,” he told analysts during a conference call on Thursday.

“We have a lot of white space in discount, but we won’t just focus on discount because there (are) other markets where it’s not a discount market and there’s more opportunity to grow our Farm Boy, our Longo’s, our Food Land.” 

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Empire also announced the appointment of Jo Mark Zurel to the company’s board of directors.

Zurel is chair of the board at Fortis Inc. and also serves on the boards of Major Drilling Group International Inc. and Highland Copper Co. Inc.