Canadian Dollar Slides on Weak Retail Data and After U.S. GDP Misses Estimates

Canadian Retail Sales Disappoint

The Canadian dollar took a hit following a raft of disappointing economic data. The Loonie is feeling pressure from underwhelming fourth quarter retail data and disappointing fourth quarter U.S. gross domestic product (GDP) numbers fell to a two-week low against the greenback. One Canadian dollar is now worth around USD$0.75. At the end of January, the Canadian dollar was trading near USD$0.75.

Canadian retail sales surprised investors after posting their worst performance in nine months in December. The decrease ends four consecutive months of gain in the retail sector and comes at a time of tepid wage gains and record household debt levels.

In December, Canadian retail sales fell 0.5% month over month to a seasonally adjusted $44.91 billion. Economists expected Canadian retail sales to remain unchanged from November’s gain of 0.3%.1

The decline was broad-based with nine out of 11 sectors posting lower sales. The biggest sales—autos, which account for around 25% of total retail sales—were down by nine percent. Even if you exclude auto sales, overall retail sales were still down 0.3% in December.

A pullback in consumer spending results in a decline at health and personal care stores (-4.1%), clothing stores (-3.7%), electronics and appliances (-2.3%), and liquor stores (-3.6%). The only areas to report increases were building materials (0.7%) and sales as gas stations (6.6%).

Fourth-Quarter U.S. GDP Disappoints

The Canadian dollar is also feeling pressure following disappointing fourth-quarter U.S. GDP data. Fourth-quarter GDP advanced 1.9%. Economists expected the U.S. economy to advance 2.1% in the fourth quarter.2

The miss comes despite stronger than expected consumer spending. Consumer spending advanced 3.0% in the fourth quarter. It was previously reported to have increased 2.5%. This is an important metric as U.S. consumer spending accounts for more than 70% of GDP. Still, GDP was weighed down by exports, business investment, and state and local government spending.

The U.S. economy grew just 1.6% in fiscal 2016, its worst performance since 2011. In 2015, U.S. GDP grew 2.6%. On the campaign trail, Donald Trump promised that, if elected, he would steer the U.S. economy to four percent annual GDP growth.

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Will Canada’s retail numbers continue to underwhelm or will they rebound in early 2017? Will the U.S. economy pick up steam under President Trump’s economic policies?

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Sources:

  1. “Retail trade, December 2016,” Statistics Canada, February 22, 2017; http://www.statcan.gc.ca/daily-quotidien/170222/dq170222a-eng.htm.
  2. “National Income and Product Accounts Gross Domestic Product: Fourth Quarter and Annual 2016 (Advance Estimate),” Bureau of Economic Analysis, February 28, 2017; https://www.bea.gov/newsreleases/national/gdp/2017/gdp4q16_adv.htm.
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George Karpouzis is the co-founder of Learn-to-Trade and has been personally providing education and mentoring to over 3000 members since 1999. George has been trading in the stocks, options, futures and forex markets using technical analysis since 1986. With the help of advancements in trading technology the Learn To Trade program is now accessible worldwide. His background and passion for teaching brings an invaluable asset to our members. George is constantly striving to improve the program content and develop new strategic relationships for the benefit of the members. Add me to your G+

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