Global equity markets finished slightly lower over the week ended April 22. Investor sentiment toward equities diminished after U.S. Federal Reserve Board (“Fed”) Chair Jerome Powell suggested the Fed may aggressively raise rates to combat surging inflation. The S&P/TSX Composite Index declined, dragged lower by the Materials and Information Technology sectors. In the U.S., the S&P 500 Index also fell, hindered by weakness in the Communication Services sector. Yields on 10-year government bonds in Canada and the U.S. both advanced during the week, moving closer to the 3.00% level. Oil and gold prices both fell over the week.
Canadian consumer prices keep rising
Consumer prices in Canada moved even higher in March, advancing at the highest annual rate since January 1991.
Canada’s inflation rate was 6.7%, exceeding the 6.1% year-over-year increase expected by economists.
Fueled by geopolitical tensions and supply chain disruptions, higher energy prices continued to contribute to higher inflation.
Higher consumer prices sparked market expectations that the Bank of Canada may continue to raise interest rates this year.
Retail sales edge forward slightly
Canadian retail sales advanced by 0.1% in February, which surprised economists estimating a 0.5% decline. However, it was a significant slowdown from the 3.3% increase in the previous month.
Gasoline sales were the main contributor partly due to higher prices. Meanwhile, sales of motor vehicles and parts fell during the month.
Statistics Canada estimated retail sales rose by 1.4% in March, suggesting Canadian consumers remain relatively resilient despite higher prices.
Signs point to declining U.S. home sales
Recent data may be suggesting demand for real estate in the U.S. could be waning after a prolonged period of intense demand, which has helped push up prices.
Existing home sales in the U.S. fell by 2.7% in March to its lowest level since June 2020 at 5.77 million units.
The Mortgage Bankers Association of America’s (“MBA”) 30-year mortgage rate increased to its highest level since 2010 at 5.20% during the week ended April 15. Over the same week, mortgage applications fell 5.0% in their sixth-straight weekly decline.
The MBA noted elevated prices, low supply, and rising mortgage rates might be affecting real estate demand.
IMF expects slower growth
In its most recent World Economic Outlook, the International Monetary Fund (“IMF”) lowered its projection for global economic growth in 2022, projecting the growth rate at 3.6% this year, down from the 4.4% rate in its January projection.
The IMF believes the Russian-Ukraine conflict will slow economic growth by disrupting the global supply chain and pushing up key commodities prices.
The IMF projects the Canadian economy will expand by 3.9% in 2022, and believes it may slow down largely because of rising interest rates and its connection with the U.S. economy, which is also projected to lose momentum in 2022.
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