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What happened last week?
Each of the U.S. equity indexes lost about 2½ percent last week, while Canada’s TSX slipped one-third of a percent during its Victoria Day shortened week. Gold leapt 6½ percent and moved back toward its all-time high. The Canadian dollar moved up more than a cent, or more accurately the U.S. dollar lost value against most currencies last week.
The U.S. House of Representatives passed a “big, beautiful bill” that the non-partisan Congressional Budget Office predicts will increase the federal deficit by $3.8 Trillion over the next decade. On Wednesday, after the House narrowly passed bill that brings multitrillion dollar tax and spending cuts, U.S. equity markets fell. The bill is now in the hands of the U.S. Senate, where changes are expected. CNBC and budget bill
Additionally, the U.S. government had its creditworthiness rating downgraded by Moody’s, which followed the same conclusion reached previously by S&P Global ratings in 2011 and Fitch Ratings in 2023. Moody’s had held a perfect rating for the U.S. since 1917. The ability to repay its debts based on its strong financial position is no longer at the highest level for any of the major ratings agencies. BBC and Moody's
The lower rating will bring higher borrowing rates and, ultimately costs to service the federal deficit. The increasing federal government debt will also increase carrying costs for taxpayers. CNBC and big bill
The Canadian Consumer Price Index (CPI) rose 1.7% year-over-year in April, down from a 2.3% increase in March. The lower inflation rate was led by energy prices that fell by 12.7% in April, after a 0.3% decline in March. Excluding energy prices, CPI rose 2.9% in April compared with a 2.5% increase in March. Inflation for food purchased in stores increased to 3.8% in April, following a 3.2% increase in March. StatsCan and CPI
Retail sales increased for the fourth consecutive quarter as six of nine subsectors saw increases. The largest increases were seen at motor vehicle and parts dealers, while sales at gasoline stations and fuel vendors fell in response to lower prices. StatsCan and retail sales
What’s ahead for this week and beyond?
In Canada, wholesale and manufacturing sales, average weekly earnings and Gross Domestic Product for March and Q1 will be released.
In the U.S., after Memorial Day on Monday, when American markets will be closed, durable goods orders, wholesale and retail inventories, wholesale sales, pending home sales, house price index, consumer confidence, GDP and the Personal Consumption Expenditures Price Index (PCE) for April will be reported.
Globally, Eurozone’s Business and Consumer Survey, business climate, consumer confidence, consumer inflation expectations, services and industrial sentiment, Japan’s CPI, industrial production retail sales and unemployment, and China’s year-to-date corporate profits will be released.
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