• Risk appetite was on themend this week with stockmarkets recouping all of last week’s losses. Even the disappointing U.S. housing data released this week did not push markets down.
• Existing home sales in February gave up some of their previous gains, but a nascent recovery seems to be taking place as the overall trend remains upwards. In contrast, new home sales do not show any signs of turning around. The divergence in trends is not surprising, as the new market faces fierce competition from foreclosed homes, which
sell at a discount.
sell at a discount.
• But, this week also delivered some good news about initial jobless claims. The four-week moving average, a less volatile gauge, dropped to its lowest level since July 2008.
Canada
• Three government budgets were on tap this week: federal, New Brunswick, and Saskatchewan. The first (our analysis here) is unlikely to pass, bringing about a likely federal election in early May. The other two offer a stark contrast in provincial fortunes, with a slew of fiscal austerity measures in New Brunswick (our analysis here) while further tax relief was provided in Saskatchewan (our analysis here). With few expectations of either tax relief or sharp austerity,
the Ontario budget, forthcoming on Tuesday (our preview here), will likely sit somewhere in between.
the Ontario budget, forthcoming on Tuesday (our preview here), will likely sit somewhere in between.
• Canadian retail sales fell by 0.3% M/M in January. Volumes fell by 0.6% M/M. Consumer durables such as vehicles and home-related items led the way down. This was a second consecutive broad-based monthly decline, providing further evidence of consumer fatigue at this stage of the economic recovery – which is a dominant theme in our forecasts. Thankfully, other sources of economic activity such as business investment and exports are still likely to push real GDP growth above 3% in the first quarter.
