Global equity markets finished higher over the week ended May 19, largely in response to expectations U.S. lawmakers are closing in on an agreement to extend the U.S. debt ceiling. In Canada, the S&P/TSX Composite Index dropped, dragged down by the Materials sector. U.S. equities, as measured by the MSCI USA Index, posted a gain. Yields on 10-year government bonds in Canada and the U.S. both moved higher. The price of oil gained over the week, while the price of gold fell.
Canada’s inflation rate ticks higher
Canada’s inflation rate moved higher in April, which was the first increase in Canada’s inflation rate since June 2022.
April’s rate was 4.4%, rising from 4.3% in March. It was also higher than the 4.1% rate economists had expected, based on a Bloomberg Survey.
The increase was driven by a rise in costs for mortgages, rent and transportation.
The rising inflation print raised concerns the Bank of Canada could go ahead with another interest rate increase.
Higher inflation may be taking a toll on Canadian households. Statistics Canada reported that retail sales dropped by 1.4% in March, which was its second consecutive monthly decline.
April sees growth in U.S. retail sales
The U.S. consumer proved to be resilient again in April, pushing retail sales higher.
Retail sales rose by 0.4%, which follows two straight monthly declines.
Sales increased at motor vehicles and parts dealers, and at miscellaneous store retailers. Conversely, sales declined at gasoline stations.
While inflation and interest rates remain high, spending remains relatively robust as U.S. consumers benefit from a strong labour market and pent up savings accumulated during the pandemic.
Key economic indictors in China improve
Retail sales in China surged higher by 18.4% year-over-year in April, which was its sharpest pace of growth since March 2021.
While this compared to a lower base last year when the country was in lockdown restrictions, sales were strong for clothing, furniture and oil products.
On the business front, industrial production also increased over last year, rising by 5.6%, benefiting from higher output for oil and gas, along with raw chemicals.
The data suggests economic activity has picked up as the country emerges from its strict COVID-19 policy.
Japan’s economy returns to growth
For the first time since the second quarter of 2022, annualized growth in Japan’s economy turned positive in the first quarter of 2023.
According to a preliminary estimate, Japan’s gross domestic product grew at an annualized pace of 1.6%, which topped the 0.8% increase expected by economists.
Strong contributions to growth came from a rise in consumer spending and business investment, which outweighed the negative impact from net trade.
As the second quarter began, Japan reported it posted a year-over-year increase in exports in April, while imports fell over the same period, which narrowed its trade deficit.
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