Global equity markets finished higher over the week. It was a short week for U.S. equity and fixed income markets because of the Thanksgiving holiday. Investors weighed the potential impact from central bank rate cuts and tariffs on global economic activity. The S&P/TSX Composite Index advanced to a new record high, led by the Information Technology sector. U.S. equities finished higher. Yields on 10-year government bonds in Canada and the U.S. declined. The price of oil and gold fell over the week.
Canada’s growth slows in Q3
- Canada’s economy grew at a meagre pace in the third quarter of 2024, expanding by 1.0%, annualized. Third-quarter growth was the slowest since the fourth quarter of 2023.
- Household and government spending drove growth over the quarter. As the Bank of Canada (“BoC”) began lowering interest rates, spending started to pick up, helping growth.
- Real estate market activity also expanded over the quarter, a positive signal for a troubled area of Canada’s economy. The Canadian Real Estate Association expects real estate activity to pick up next year.
- Conversely, a fall in net exports and business investment weighed on growth.
- The BoC is expected to lower interest rates at its December meeting. The data shows the economy still needs some support.
U.S. PCE picks up as expected in October
- The U.S. personal consumption expenditure price index (“PCE”) rose by 2.3% year-over-year in October, accelerating from the 2.1% increase in September and matching economists’ expectations.
- This marked the first increase in the U.S. Federal Reserve Board’s (“Fed”) preferred inflation gauge in three months.
- Core PCE also picked up in October, rising to 2.8%.
- Adding to upward pressure was a relatively strong consumer. Personal spending rose by 0.4% over the month of October, benefiting in part due to a 0.6% rise in personal income.
- This was the last PCE data before the Fed’s final meeting of 2024. The Fed is likely to cut interest rates again in December but forego another jumbo size rate cut of 50 basis points, as it did in September.
European inflation moves higher
- A flash estimate showed Europe’s inflation rate was 2.3% in November, matching estimates, and up from the 2.0% rate in October.
- This marked the highest rate of inflation in Europe since August 2024 as energy prices fell less than the previous month.
- The price growth of food slowed over the month, which could provide a small bit of relief for European consumers.
- Core inflation was unchanged at 2.7% in November, which was below the 2.8% expected by economists.
- The data is unlikely to take the European Central Bank (“ECB”) from its path of lowering interest rates. The increase in inflation was expected. The ECB makes its last interest rate announcement of 2024 on December 12, where it is expected to cut rates again.
China’s industrial profits decline
- Over the January to October period in 2024, industrial profits in China dropped by 4.3% compared to the same period in 2023.
- The decline was sharper than the 3.5% drop in the January to September period.
- State-owned companies drove the decline. Among industries, profits fell sharply in the minerals and chemicals industries.
- China’s industrial sector has been hindered by high input prices and relatively soft demand, both domestically and abroad, due in part to tight financial conditions.
- With potential tariffs on the way, the business environment may continue to be a challenging one for industrial companies in China.
