Friday's News Recap: Canadian Employment Falls, U.S. Consumer Sentiment Rebounds

News Recap | Written by CEP News | Jul 11 08 20:26 GMT |
(CEP News) - North American economic releases were characterized by elements of surprise Friday with Canadian employment unexpectedly shedding jobs in June, the University of Michigan consumer sentiment index surprising to the upside and speculation about Fannie Mae and Freddie Mac rocking markets.

For the first time since December, Canadian employment shed 5,000 jobs in June against forecasts for a modest increase of 8k. In May, 8.4k jobs were added. Meanwhile, Canada's unemployment rate ticked up to 6.2% from the previous month's 6.1%. Economists were expecting the rate to remain unchanged from May. However, in the last 12 months, employment has grown 1.7% or 290,000 jobs.

"Reality may finally be catching up with the Canadian job market," said BMO deputy chief economist Doug Porter. "We wouldn't make too much of a one-month dip in employment - that can happen even in the middle of a boom."

On the housing front, Canadian home price increases slowed to 4.1% on an annual basis in May, the slowest pace recorded in almost six years as housing markets in Alberta and British Columbia cool, Statistics Canada said. May's price increase was the slowest since July 2002 when year-over-year prices increased 4%. On a monthly basis, prices were unchanged between April and May.

Strong exports to the U.S. and record exporting to other countries drove Canada's trade surplus with the rest of the world up to $5.5 billion in May from a revised April surplus figure of $4.8 billion. Canadian exports rose for a fifth consecutive month, jumping 5.4% to $42.1 billion as both volumes and prices increased, Statistics Canada reported.

Following the collapse of Fannie Mae and Freddie Mac share prices over the last two days and speculation of a government bailout, U.S. Treasury Secretary Henry Paulson released a statement saying the Treasury Department is continuing its dialogue with regulators and firms. He also said the focus is to back Fannie Mae and Freddie Mac "in their current form".

Later, there were conflicting reports about whether the Federal Reserve would allow Fannie and Freddie to borrow from the discount window. A newswire initially cited sources that Fed Chairman Ben Bernanke said the government-sponsored enterprises could use the discount window. Later, Federal Reserve spokesperson Michelle Smith told reporters there have been no official discussions with Fannie and Freddie about the discount window.

In data releases, the preliminary consumer sentiment survey from Reuters and the University of Michigan rebounded for the first time since January, reaching a score of 56.6 in July from June's reading of 56.4. The consensus was expecting a further decline to 55.5. According to the report, 90% of respondents said they thought the U.S. economy was in recession, with the downturn expected to deepen further.

The outlook continues to look grim with the consumer outlook index falling to 48.3 in July from 49.2 in the prior report. The current conditions index rebounded to 69.5 from 67.6 in last month's final report.

In another surprising result, the U.S. monthly trade deficit unexpectedly shrank in May to -$59.8 billion, with April's deficit figure downwardly revised to -$60.5 billion from a previously reported -$60.9 billion, the U.S. Census Bureau reported. Economists had been expecting a deficit of $62.5 billion, with expectations ranging from -$65.0 billion to -$59.5 billion. A sharp decline in oil imports was responsible for the decline.

According to the U.S. Treasury, monthly receipts totalled $259.912 billion and spending came in at $209.188 billion, resulting in a deficit of $50.725 billion for June, a 145.1% increase from the prior year.

U.S. import prices continued to rise in June, according to data released from the U.S. Bureau of Labor Statistics (BLS) on Friday, which showed a 0.9% month-over-month increase in import prices excluding petroleum products and a 6.6% annual gain. In May, the import price index excluding petroleum rose 0.7% month-over-month and 6.6% year-over-year.

In overnight releases, the Federal Statistics Office of Germany (Destatis) said that German wholesale price inflation reached 8.9% year-over-year in June, the highest annualized increase recorded since January 1982 and in line with forecasts. May's rate was 8.1%. Month-over-month, the wholesale price index grew 0.9% in June, also as expected and down from the 1.4% growth rate observed in May.

WTI crude oil surged more than four dollars to $145.92 in overnight trading due to rising tensions in the Middle East and prospects of further violence in Nigeria.

Japanese consumer confidence waned further in June, falling to a reading of 32.9 despite expectations for a fall from 34.1 in May to 33.0. Household consumer confidence did slightly better than the consensus of 32.5, declining to 32.6 from 33.9.

Final figures for Japanese industrial production for May showed some small unexpected downward revisions with production expanding by 2.8% month-over-month despite the preliminary 2.9% seen earlier, and an annual 1.1% rise compared to the preliminary 1.2% rate.

Speaking at a conference in Yalta, Ukraine on Friday, International Monetary Fund Managing Director Dominique Strauss-Kahn stressed that the global economy, caught between "the ice of a recession and the fire of inflation", would not recover before next year. Strauss-Kahn also emphasized that the economic consequences of the current financial crisis is still "in front of us" but that the worst of the rout is over.

By Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Erik Kevin Franco, efranco@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Sean McKibbon, smckibbon@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it and Todd Wailoo, twailoo@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Nancy Girgis, ngirgis@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it

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