Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Citi economist Veronica Clark thinks the Bank of Canada will cut rates in both December and January,
“GDP by industry was flat on the month in August, in line with expectations and Statistics Canada’s preliminary estimate. While activity is expected to rise 0.3%MoM in September, with revisions lower to start the quarter in July, Q3 GDP by industry is estimated to rise by around 1% annualized. We expect a softer 0.5% increase in GDP by expenditure, but the BoC’s latest forecast for 1.5% growth still looks too high. With little to change the backdrop of soft growth and an economy in excess supply that will continue to weigh on inflation, we continue to expect a faster return towards a neutral policy rate with 50bp cuts in December and January”
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RBC Capital Markets head of global commodity strategy Helima Croft assessed the importance of the U.S. election on the oil market,
“Iran could find itself the principal target of US sanctions if former President Trump prevails next week, and several of his senior advisors have expressed strong support for an Israeli strike on the country‘s nuclear and energy facilities. We do not envision a major ramping up of Iran sanctions if Harris is elected and would expect her administration to focus on winding down the year -long war. There are also clear differences on Russia. Senior Trump advisors have called for a … …swift end to what they term an “unwinnable” war, while Harris looks set to continue Biden’s strong support for Ukraine. In addition to the issue of sanctions, changes in policy on the war without buy -in from Kyiv and Europe could have impacts on energy markets. While both Harris and Trump have campaigned on the continued presence of oil and gas in the energy mix, Harris’ plan would see a continued push to regulate emissions, whereas Trump would seek to broadly deregulate the space”
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BMO chief economist Doug Porter explains that the impact of population growth on GDP is not straightforward,
“This week’s Focus Feature will take a deeper dive into the many potential economic implications from Ottawa’s new immigration targets, from growth, to inflation, to housing, to BoC policy. One item we would like to address right off the bat is the prevailing narrative that population growth is a direct driver of short-term GDP growth, and the coming steep slowdown in the former could crunch the latter. But, the simple reality is that the historical record shows no such thing (Chart). August GDP was up just 1.3% y/y, even as population growth has been a blistering 3.0% y/y. Over the long term, yes, there’s little debate that labour force growth is a building block of potential economic growth (alongside productivity growth). But the record suggests that there’s almost no short-term impact—in fact, the correlation has been negative over the past 50 years! How can that possibly be the case? Remember that GDP is ultimately a measure of output/production, and population growth does not expand the capital stock and only boosts the labour input insofar as it doesn’t displace an existing potential worker. Looking past the wildness of recent years, note the 2017-19 period—growth was cooling even as population growth was ramping up.
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Diversion: “Princeton 3D-Printed a Nuclear Fusion Reactor” – Gizmodo