Monday, October 24, 2011

Market Focus

Canada's inflation rate moves a notch higher.
Despite ongoing concerns about the strength of the economy, consumer prices continued to rise in September. The Bank of Canada's core inflation rate climbed 0.5% during the month, sufficient to produce a 2.2% annual advance. This was the first time since December 2008 that the core rate was above the mid-point of the central bank's 1% to 3% target range. Five of the eight major consumer price index sub-groups recorded monthly gains with clothing and footwear (+4.9%) posting the largest advance. At the same time, continued downward pressure on global oil prices produced only a modest 0.3% decline in gasoline prices. Despite greater price pressure, analysts expect the Bank of Canada's October 25 announcement will leave interest rates unchanged.
U.S. manufacturing continues to expand
Further recovery in the U.S. automotive industry led manufacturing production higher again in September as supply chains continue to normalize in the wake of Japan's earthquake and tsunami earlier in the year. Overall industrial production climbed at an annualized 5.1% pace in the third quarter of 2011, a dramatic improvement over the 0.5% pace recorded in the second quarter of this year. At the same time, overall capacity utilization rose to 77.4%. While this is clearly not a concern from an inflationary perspective, it is the highest rate of plant use since August 2008. It is expected that continued growth in manufacturing output will be reflected in an increase in hiring in this sector as annual job growth stood at a modest 1.7% in September.
U.K. inflation rises to match record high
The most recent data from the Office for National Statistics revealed that U.K. consumer prices had accelerated to a 5.2% pace in September from 4.5% in August. The new inflation rate matches the record high reported in September 2008. Inflation in the U.K. has been above the central bank's 2.0% goal since December 2009 and has exceeded the 3.0% upper limit since March 2010. Nevertheless, Bank of England Governor Mervyn King has indicated that inflation is expected to slow significantly in 2012, and with considerable uncertainty over economic growth, no tightening of monetary policy is anticipated.

Stock markets

Index    Friday Close        Week    Month  YTD        1 year    2010       2009       2008
Canada(TSX)      11,949   -1.1%     0.0%      -12.5%  -5.4%     14.4%    30.7%    -35.0%
US (S&P500)       1,238     -1.2%     5.8%      -1.6%     4.7%      25.0%    23.6%    -38.6%

What You Earn
                                                 30 Day   1 yr         2 yr         5 yr         10 yr
Government of Canada                0.87        0.97        1.08        1.62        2.37
Corporate Bonds                        1.16        2.06        2.14        2.83        4.42
GIC - (Avg. Bank rate)               0.33        0.75        1.10        1.76       
GIC - (Non Bank Rates)             0.90        2.25        2.60        3.50       
Savings Account               1.75        Daily Interest Savings, Chequeing Privledges, $1,000 min Deposit

                            Friday Close    Weekly Change
Gold (NY)            1656.4               -1.6%
Oil (NY)                 87.82                2.0%
CRB Commodity Index 312.78      -0.7%
30 yr Can. Bond    2.98%               0.7%
30 yr U.S. Bond    3.21%               0.6%
Can$ to US$        0.993                 0.7%

Mortgage Rates

5 year closed – 3.39%
4 year closed – 3.19%
1 year closed – 2.65%

Variable Rate prime minus .20%

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