CIBC Private Wealth
October 01, 2024
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Last Friday, the US Bureau of Economic Analysis reported that the annual personal consumption expenditure price index (PCE) subsided in August. The ongoing decline in the PCE could result in more rate cuts from the US Federal Reserve Board (Fed) this year. That wasn’t the only critical economic announcement on Friday. Statistics Canada (StatsCan) released data on Canada’s gross domestic product (GDP) in July.
- The annual PCE slowed to 2.2% in August, which was its lowest level since February 2021. The PCE is a closely followed inflation gauge of the Fed. On a monthly basis, the PCE rose by 0.1% in August, down from the 0.2% increase in July.
- Inching closer to the Fed’s 2% target, the result came just before the Fed’s 50-basis-point rate cut at its September meeting. If gauges of inflation keep falling and the labour market remains wonky, the Fed is likely to continue lowering interest rates this quarter.
- North of the border, Canada’s GDP expanded by 0.2% in July, up from no growth (0.0%) in June. Canada’s economy benefited from a more robust retail trade sector. The finance and insurance industry also contributed to growth over the month.
- Looking ahead, StatsCan estimated Canada’s economy was unchanged in August. Despite the encouraging growth figure in July following the Bank of Canada’s (BoC) June rate cut, tight financial conditions continue to hinder the economy. It could take some time before the effects of lower interest rates impact economic activity.
These data releases point to more interest-rate cuts from the BoC and Fed this year. While rate cuts are expected to help reignite economic activity, the impact might not be immediate. Economic conditions remain a bit uncertain due to ongoing labour market weakness and modest economic growth.
If you would like to discuss this economic and market update or have questions about your finances and investments, please feel free to contact me anytime.