Daily Economic Update

Economic data highlights this week
Oct 7, 2008

Canada – The Canadian economic data release highlights this week are housing starts on Wednesday and the always much-watched jobs report and the international trade balance on Friday.

Housing starts soared 13.1% in August to an annualized 211,000, but most of the increase was in the volatile multiples component, which rose 25.2%. The more stable singles component rose a more moderate 2%. Given indications of falling house prices and sales in recent months, we do not expect these gains to persist. In September we are assuming a decline in the multiples component of 10%, while construction of singles is expected drop by a more moderate 2%. This is expected to send overall starts in the month down to an annualized 198,000 units.

Although GDP growth is expected to rebound in the third quarter, it will not prevent annual growth for the year of a below-average 1%. This weak annual growth is expected to be reflected in minimal near-term gains in employment, with the risk of occasional small declines, and an upward trend in the unemployment rate going forward. For August, we are suggesting a gain of only 7,000 jobs down from the 15,200 rise in August. This increase in net new jobs will not be enough to prevent the September unemployment rate rising to 6.2% from 6.1% in August.

United States – There is a trickle of U.S. economic data reports throughout the week, with the highlight being the international trade report for August on Friday.

The July trade deficit unexpectedly deteriorated to US$62.2 billion from US$58.8 billion in June. The deterioration largely reflected petroleum imports, which jumped $6.2 billion (on a census basis). This increase was surprising as the spot price for crude oil was flat in the month. In August, crude oil prices showed even greater weakness, dropping close to 13%. Because of this drop in oil prices, we expect the deterioration in the July trade deficit to be more than reversed, with the deficit dropping to US$57 billion in August. The improvement is also consistent with the earlier depreciation of the U.S. dollar providing support to exports and dampening demand for imports.

Paul Ferley, Assistant Chief Economist, RBC Economics Research

To view charts of today's data, go to
http://www.rbc.com/economics/html_calendars/ca/calendar.html (Canada)
http://www.rbc.com/economics/html_calendars/us/calendar.html (United States)

RBC Economics Research contacts:
Paul Ferley, Assistant Chief Economist
Dawn Desjardins, Assistant Chief Economist
Josh Heller, Economist

Go to Financial Markets Daily (pdf) for a daily summary of North American interest rates and foreign exchange rates.

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