Global Economy

Global equity markets finished lower over the week that ended October 14 as concerns about inflation, monetary tightening, and slowing global economic activity weighed on sentiment. The S&P/TSX Composite Index posted a loss, dragged down by the weak performance of the Materials sector. In the U.S., the S&P 500 Index finished lower. Oil prices declined. In its October monthly report, the Organization of the Petroleum Exporting Countries lowered its global oil demand outlook for the fourth quarter.2023 outlook downgraded

• In its most recent World Economic Outlook, the International Monetary Fund (“IMF”) said the global economy will expand by 3.2% this year and slow to 2.7% in 2023.

• The growth rate in 2023 is a downward revision to the IMF’s earlier projection of 2.9% growth.

• The economic organization believes geopolitical tensions and tighter financial conditions may weigh on growth. Furthermore, policy tightening by central banks, including the U.S. Federal Reserve Board (“Fed”), will raise debt levels among developing economies.

• The IMF projects Canada’s economic growth to slow considerably, from 4.5% in 2021 to 3.3% this year and 1.5% in 2023.

Broad-based price pressures persist

• The U.S. inflation rate eased to 8.2% in September from 8.3% in the previous month but was still higher than the 8.1% rate economists expected.

• The slowdown comes amid easing price growth in energy product costs.

• Slower inflation will not likely deter the Fed from raising rates further in November as price pressures remain elevated and broad-based.

• The core inflation rate, which excludes food and energy, rose to a 40-year high in September, reaching 6.6%.

Pressure on Canada’s real estate market

• According to the Canadian Real Estate Association (“CREA”), sales of existing homes in Canada fell by 3.9% in September, exceeding the 1.0% decline economists estimated.

• The drop marked the seventh consecutive decline in home sales as demand across Canada wanes, with home prices at already elevated levels and higher mortgage rates.

• CREA noted prices did ease further in September, with the benchmark price falling by 1.4%.

• There are concerns some cities in Canada are seeing a housing market bubble. According to the UBS Global Real Estate Bubble Index, Toronto and Vancouver made the list of the top 10 housing market bubbles in the world.

U.K. economy struggling

• The U.K. economy shrank 0.3% in August, surprising economists expecting flat growth (0.0%).

• It marked the U.K. economy’s second decline in the past three months.

• Weakness in the manufacturing and service sector dragged the economy down over the month. Meanwhile, industrial production dropped by 1.8% in August, its third straight monthly decline.

• The U.K. economy appears to be burdened by rising prices, higher interest rates, and geopolitical tensions.

• The Bank of England predicted a prolonged period of weakness for the U.K. economy. U.K. financial markets have been volatile in recent weeks largely due to policy changes by the new government.

SOURCE: CANADA LIFE ASSET MANAGEMENT

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