Thoughts

November 11, 2022 | 13:18

Taking the Economy’s Pulse

Economist

Senior Economist and Director
Economics

Sal Guatieri is a Senior Economist and Director at BMO Capital Markets, with over two decades experience as a ma... (Read more)

Sal Guatieri

Senior Economist and Director
Economics

Sal Guatieri is a Senior Economist and Director at BMO Capital Markets, with over two decades experience as a ma... (Read more)

Given the lack of economic releases on both sides of the border this week, it’s worth taking a look at some of the less popular, though timelier, indicators to check on the economy’s pulse heading into year-end.

Let’s start with travel-related purchases to see if there is any sign of waning demand that would also relieve price pressures in this area. While air travel in both the U.S. and Canada is still flying high, it lost some altitude in early November. Spending on accommodation also lurched down in the U.S., possibly due to last month’s jump in hotel rates. Apparently, revenge travel is running into the stone-cold reality of tighter budgets.

Consumers are pulling back though putting up a fight. Retail, recreational and transit mobility held firm in the U.S., at least through mid-October (when Google stopped updating its data), though it dipped in Canada. After a strong summer season, restaurant visits remain above pre-pandemic levels in Canada and close to normal stateside, but they slipped in early November in both countries. U.S. cinema outings never fully recovered from the pandemic and haven’t made much headway of late. U.S. payment card spending remains robust, even among lower-income households. This, combined with continued sturdy consumer credit growth, could pose an obstacle for an inflation-fighting Fed.

Indeed’s job postings are trending lower in the U.S., suggesting some reversal in the BLS’s reported rebound in vacancies in September. But postings hooked up in Canada, casting an even better glow on the strong October jobs report. The U.S. Census Household Pulse data suggest COVID’s grip on labour supply continues to loosen, though more workers are reporting absences related to other illnesses (i.e., a bad flu season).

U.S. existing home sales trended down in October, according to Redfin’s weekly numbers, as the market continues to struggle with two-decade-high mortgage rates and dismal affordability. Median prices also fell further, with homes taking longer to sell, but new listings and inventory remain relatively in check, limiting the decline.

For the overall economy, the New York Fed’s Weekly Economic Index continues to grind lower but held above 2% y/y in early November, indicating some resilience. The OECD’s Weekly Tracker also suggests some durability in Canada, with growth hovering just under 3% y/y through late October.

Bottom Line: The most aggressive course of monetary tightening in decades is gradually working to cool demand, but there are pockets of resistance that could hinder the inflation fight.