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February 1, 2021

U.S., Canadian Growth Slow In The Fourth Quarter

 

  • U.S. economic growth slowed in the final three months of 2020 after a record level of growth in the third quarter. Gross domestic product (GDP) expanded at a four percent annualized rate in the fourth quarter. The median forecast by economists predicted 4.2 percent growth. While output of goods and services was far slower than the record 33.4 percent rate in the previous three months, the fourth quarter growth rate was still higher than the average of the decade-long expansion that ended with the onset of the COVID-19 pandemic in early 2020. The deceleration in overall growth largely reflected a moderation in consumer spending. Click here for the full report.
  • According to Reuters, meanwhile, while Canada’s economic growth outpaced expectations in November, posting a seventh consecutive monthly gain, it is likely the economy posted its biggest GDP drop on record in 2020. Preliminary estimates show the economy shrank 5.1 percent for the year. Economic activity in Canada remains about three percent below pre-pandemic levels.
  • According to the U.S. Department of Labor, compensation costs for civilian workers increased 0.7 percent in the fourth quarter of 2020. Wages and salaries rose 0.9 percent while benefit costs increased 0.6 percent from September 2020. Click here to read the complete report.
  • According to the U.S. Department of Commerce, personal incomes increased $116.6 billion (0.6 percent) in December while personal consumption expenditures decreased $27.9 billion, or 0.2 percent.
  • On hopes of a successful COVID-19 vaccine rollout and additional fiscal stimulus measures in major countries, the International Monetary Fund (IMF) raised its forecast for global growth for 2021. Specifically, the IMF believes the global economy will expand 5.5 percent this year, up from the 5.2 percent growth it projected in October. That expansion would match 2007 as the best growth rate in four decades. For global trade, the IMF sees import and export volumes rising by 8.1 percent this year after an estimated 9.6 percent decline in 2020. Click here to read the full report. The IMF did warn of a more dire outlook for Canada’s economy, reducing its 2021 GDP outlook for the country to 3.6 percent from 5.2 percent.
  • The Federal Reserve Bank of Chicago’s National Activity Index, a gauge of future growth, was little changed at -0.50 in January though the four-week moving average of the reading for financial conditions indicated those conditions are improving across the United States. The Conference Board’s Index of Leading Indicators – another gauge of future growth – increased 0.3 percent in December to 109.5 following a 0.7 percent increase in November and a 0.9 percent increase in October.
  • The Federal Reserve Bank of Dallas said its manufacturing survey continued to expand in January, albeit at a much slower pace. The bank’s production index, a key measure of Texas manufacturing conditions, fell from 26.8 to 4.6, indicating a sharp deceleration in output growth while other measures of manufacturing activity also pointed to more muted growth. The new orders index dropped 13 points to 6.3, and the growth rate of orders index fell from 15.9 to 5.9. Click here to read the full report. The Federal Reserve Bank of Richmond, meanwhile, said its manufacturing reading also showed signs of growth in January. Its composite index fell from 19 in December to 14 in January, but remained in expansionary territory, as did all three of its component indexes – shipments, new orders, and employment. Click here to read that report.
  • According to the Federal Reserve of Kansas City, the manufacturing sector in the Midwest United States increased to 17 in January from 14 in December. The bank said activity rose more at durable goods plants, driven by manufacturing of primary metals, machinery, electronics, and transportation equipment. Production, shipments, new orders, employment, employee workweeks, new orders for exports, and supplier delivery time increased further in January and order backlog expanded at a steady pace. Click here to read the full report.
  • Applications for U.S. unemployment benefits fell last week, signaling that job cuts may be easing after rising in December and early January. Specifically, the number of initial jobless claims fell by 67,000 to 847,000 in the week ended January 23. Continuing claims, which provide an estimate of the number of Americans filing for ongoing unemployment benefits, dropped by 203,000 to 4.77 million in the week ended January 16.
  • In other economic news: the Conference Board’s reading of U.S. consumer confidence rose to 89.3 in January from 87.1 in December due to improved outlook for future conditions while the University of Michigan’s consumer sentiment reading fell slightly; Canadian retail sales rose for a seventh consecutive month in November, increasing 1.3 percent to $55.2 billion; and U.S. new home sales rose 1.6 percent from November 2020 to December 2020, capping the best year for sales since 2006.