Global equity markets finished slightly higher over the week ended October 13. Signals that the U.S. Federal Reserve Board (“Fed”) may hold steady at its next meeting boosted sentiment, but geopolitical tensions partially offset this. The price of oil finished higher over the week amid tensions in the Middle East. The price of gold increased. The S&P/TSX Composite Index advanced, led by the Energy sector. U.S. equities, as measured by the MSCI USA Index, finished higher. Yields on 10-year government bonds in Canada and the U.S. declined over the week.
Canadian home sales post another decline
The Canadian Real Estate Association reported that sales of existing homes in Canada dropped by 1.9% in September.
September’s drop was the third straight, suggesting demand may be softening amid high borrowing costs and elevated prices.
The average price of a home in Canada fell by 0.6% in September but rose by 2.5% compared to the same month last year.
Statistics Canada announced the value of building permits in Canada rose by 3.4% in August, following a 3.8% drop in July.
Non-residential permits increased over the month but were partially offset by a drop in residential building permits.
U.S. inflation rate remains steady
The annual U.S. inflation rate was 3.7% in September, unchanged from August, surprising economists who were expecting it to fall to 3.6%.
Energy prices continued to fall in September but at a slower pace compared to August. Food and shelter price growth eased, albeit slightly, in September.
The core inflation rate, which excludes more volatile items, ticked lower in September to 4.1%.
The attention now turns to the Fed, which announces its next interest rate decision on November 1.
The Fed’s last meeting minutes showed several, but not all, officials believe another interest rate increase may be needed. However, all officials see interest rates staying higher for longer as the Fed seeks to bring down inflation while balancing the potential negative impact on the economy.
Consumer price growth stalls in China
China’s annual inflation rate was 0.0% in September, which followed a 0.1% rate in August.
A rise in prices for housing and health care offset a decline in food and transport prices.
Muted demand in the world’s second-largest economy contributed to deflationary pressures and a challenging economic environment.
Lacklustre foreign demand is also weighing on China’s economy. Exports from China fell by 6.2% year-over-year in September, the fourth consecutive decline. Shipments of rare earth and aluminum fell considerably.
Imports also declined by 6.2% year-over-year in September.
IMF projects slower economic growth in 2024
The International Monetary Fund (“IMF”) released its October World Economic Outlook.
The IMF now projects the global economy to expand by 2.9% in 2024, down from its July projection of 3.0% growth next year.
The economic agency expects the global economy to be hindered by geopolitical tensions and tight financial conditions, particularly after a period of aggressive interest rate increases by major central banks.
The IMF expects Canada’s economy to expand by 1.6% in 2024, up from the 1.3% growth expected this year. The IMF sees the U.S. economy expanding by 1.5% and China growing by 4.2%, which would both be down from this year.
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