IAIC Market Update - January 16, 2023

(source: Bloomberg https://www.bloomberg.com/markets, MSCI https://www.msci.com/end-of-day-data-search and ARG Inc. analysis)

What happened last week?

• Thursday’s release of U.S. consumer inflation data continued the run of positive performance for equities so far in 2023. The Consumer Price Index (CPI) declined by 0.1% in December and compared to December 2021 prices have risen 6.5% on a year-over-year basis. Inflation had peaked in June at 9.1% and had been 7.1% in November 2022. Core CPI, which excludes food and energy from the basket of consumer goods and services, rose 0.3% in December and 5.7% over the last year. 
• “The index for gasoline was by far the largest contributor to the monthly all items decrease, more than offsetting increases in shelter indexes” according to the Bureau of Labor Statistics. 
• The overall rate of consumer price increases suggests that past monetary policy moves have begun to affect inflation. Both the Bank of Canada and Federal Reserve have raised their policy interest rates by 4% since March of 2022. 
• Canadian consumer inflation data for December will be released next week, which will provide some guidance for the Bank of Canada. CPI was 6.9% in October and 6.8% in November on a year-over-year basis. The next scheduled interest rate announcement for the Bank of Canada is January 25th and will include the quarterly Monetary Policy Report.

(Source₁, Source₂, Source₃, Source₄,)

What’s ahead for this week?

• In Canada, manufacturing sales, wholesale sales, retail sales, and housing starts will be released. The most important report will announce consumer and producer inflation for December.
• In the U.S., markets will be closed on Monday for the observance of Martin Luther King, Jr Day. Producer inflation, retail sales, mortgage market index, industrial and manufacturing production, building permits, housing starts, and existing home sales will be reported.
• Globally, consumer inflation releases continue with Germany and Italy contributing their country-data, as well as the entire Eurozone report. On Friday the European Central Bank Chair, Christine Lagarde will speak. China will release its fourth quarter Gross Domestic Product, industrial production, retail sales and unemployment rate. The Bank of Japan has an interest rate decision scheduled for Tuesday.