Canadian Survey on Business Conditions, Third Quarter 2024

Commodity

Economic

Summary:

Cost-related challenges remain among the top obstacles anticipated by businesses in the third quarter of 2024, though the proportion of businesses expecting cost-related obstacles has continued to ease since the second quarter of 2024. Meanwhile, the outlook of businesses has gradually improved since the fourth quarter of 2023.

Real gross domestic product rose 1.1% on a year-over-year basis in May 2024. Consumer inflation has remained below the 3% mark in 2024, rising to 2.7% on a year-over-year basis in June. Meanwhile, employment was little changed in July with a marginal loss of 2,800 jobs, while the unemployment rate was unchanged at 6.4%.

In this macroeconomic context, Statistics Canada conducted the Canadian Survey on Business Conditions from July to early August 2024. The survey collects information on the environment businesses are currently operating in and their expectations moving forward.

Businesses continue to face a variety of obstacles (see Note to readers) related to inflation, as well as interest rates and debt costs. While pressures of both cost- and labour-related obstacles have eased in the third quarter of 2024, the proportion of businesses with a positive outlook has increased, continuing the recent upward trend that began in the fourth quarter of 2023.

Cost-related obstacles remain the predominate challenge for businesses

Prices of raw materials purchased by manufacturers operating in Canada, as measured by the Raw Materials Price Index, declined 1.4% month over month in June 2024 and were up 7.5% year over year. Additionally, average hourly wages among employees increased 5.2% in July on a year-over-year basis, following a growth of 5.4% in June. In these circumstances, slightly over two-thirds (67.6%) of all businesses expect to face cost-related obstacles over the next three months, considerably higher than the proportion of businesses that expect to face labour-related obstacles (39.5%).

Half (50.2%) of all businesses expect rising inflation to be an obstacle over the next three months, cementing it as the top obstacle expected by businesses in each quarter since the first quarter of 2021. Businesses most likely to expect rising inflation to be an obstacle over the next three months operated in accommodation and food services (66.9%); retail trade (66.6%); and agriculture, forestry, fishing and hunting (57.6%).

The second most commonly expected obstacle is the rising cost of inputs, reported by 41.8% of businesses. This was led by businesses in accommodation and food services (65.9%); agriculture, forestry, fishing and hunting (64.9%); and retail trade (52.9%).

Over one-third (34.1%) of businesses expect high interest rates and debt costs to be an obstacle, led by those in agriculture, forestry, fishing and hunting (49.2%); transportation and warehousing (44.5%); and retail trade (43.4%).

When asked to indicate which expected obstacle would be the most challenging, 12.5% of businesses identified rising inflation, 10.1% indicated rising cost of inputs, and 9.0% reported recruiting skilled employees. Both the obstacles and the ordering remain consistent with the most challenging obstacles expected in the first and second quarters of 2024.

Businesses continue trend of optimism when considering their future outlook

Over three-quarters (76.7%) of businesses are either very optimistic or somewhat optimistic about their future outlook over the next 12 months. This is an increase from the second quarter of 2024 when 72.1% of businesses expected the same and continues the recent upward trend that began in the fourth quarter of 2023.

Over the next three months, 17.5% of businesses expect their sales of goods and services to increase, down from 20.7% of businesses in the second quarter of 2024. This was led by businesses in finance and insurance (26.7%); manufacturing (24.0%); and accommodation and food services (23.4%). At the same time, 19.6% of businesses expect to raise the prices of their offered goods and services over the next three months.

Over two-fifths of businesses expect a moderate level of growth in revenue over the next three years

Slightly over one-third (34.7%) of businesses expect revenue growth of 1% to 5% per year over the next three years, with an additional 11.7% of businesses expecting revenue growth of 6% to 10%. Combined, the results indicate that 46.4% of businesses are expecting a moderate level of revenue growth over the next three years. The businesses that expect revenue growth of 1% to 5% were led by those in retail trade (45.1%); administrative and support, waste management and remediation services (41.7%); and real estate and rental and leasing (39.2%).

Conversely, less than one-tenth (7.2%) of businesses indicated that they expect revenue to decrease over the next three years. Additionally, just over one-quarter (25.5%) of businesses reported that they do not know their expected revenue growth.

Furthermore, 10.6% of businesses expect to have no revenue growth over the next three years, led by businesses in health care and social assistance (19.2%); professional, scientific and technical services (12.2%); mining, quarrying, and oil and gas extraction (12.2%); and accommodation and food services (12.2%). Of businesses that expect no revenue growth, nearly half (47.0%) reported the reason as the economic environment being incapable of supporting significant growth, while 27.0% reported they were satisfied with their current level of revenue, and 16.9% cited intense competition as the reason for expecting no revenue growth.

Majority of businesses are confident in ability to repay debt in full and on time

Of the nearly three-quarters (73.7%) of businesses that do not plan to apply for debt financing over the next three months, over three-fifths (64.5%) reported being able to take on more debt. Moreover, the majority (57.3%) of businesses reported being very confident in their ability to make debt payments in full and on time. This was led by businesses in finance and insurance (70.0%); professional, scientific and technical services (64.7%); and health care and social assistance (63.6%). Furthermore, 28.1% of businesses were either somewhat confident or moderately confident, while 5.0% were either not very confident or not at all confident in their ability to make debt payments in full and on time.

Meanwhile, nearly one-quarter (22.2%) of businesses indicated being unable to take on more debt. Of businesses that reported being unable to take on more debt, the reasons cited include unfavourable interest rates (54.2%), cash flow (43.0%), and lack of confidence or uncertainty in future sales (34.3%). Businesses that were most likely to report being unable to take on more debt operated in administrative support, waste management, and remediation services (31.6%); mining, quarrying and oil and gas extraction (30.4%); and accommodation and food services (28.8%).

Majority of businesses report not needing any cybersecurity measures

Nearly one-quarter (22.2%) of businesses plan to take new or additional cybersecurity actions over the next 12 months, led by businesses in finance and insurance (38.3%); wholesale trade (36.8%); and professional, scientific and technical services (35.1%). On the other hand, the majority (54.4%) of businesses do not have any plans to take new or additional cybersecurity actions over the next 12 months. The primary reasons cited include not needing cybersecurity measures (57.1%) and having already taken any necessary cybersecurity actions (25.8%). Furthermore, nearly one-quarter (23.4%) reported that they do not know whether they will take on any new or additional cybersecurity actions over the next 12 months.

Majority of businesses have environmental practices in place

Two-thirds (66.7%) of businesses reported having environmental practices in place in the third quarter of 2024, with close to half (47.8%) indicating they currently reduce waste, while nearly two-fifths (37.5%) are reducing energy consumption, and one-third (33.6%) are encouraging employees to adopt environmentally friendly practices. This is comparable to the levels reported in the third quarter of 2023, when 68.4% of businesses indicated having environmental practices in place. On the other hand, nearly one-third (32.4%) of businesses plan to implement an environmental practice over the next 12 months.

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Risk Warnings and Disclaimers

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FXCM

Economic

Nvidia's shares have soared over 160% this year, underscoring its significance in AI, where it commands up to 95% of the market. This surge has been largely driven by its thriving data centre business, which is anticipated to generate $24 billion in the latest quarter.

However, Nvidia's journey has not been without turbulence. The stock, after reaching unprecedented heights earlier in the year, saw a sharp decline of nearly 30%. Analysts are now on high alert for any indications of softening demand for AI technology, which could hint that the rapid AI expansion might be slowing down. The focus is particularly on Nvidia's outlook for the upcoming quarter, with forecasts pointing to a 75% growth in revenue.

Concerns over possible delays in launching the next generation of Nvidia's Blackwell chips have surfaced, yet analysts are still confident. They suggest that even if Blackwell faces setbacks, the current Hopper chips will continue to generate significant revenue. Although AMD's recent acquisition of ZT Systems shows the increasing competition, Nvidia remains in a prime position to capitalise on ongoing investments in AI infrastructure.

As Nvidia gears up to release its earnings, the financial world will be keenly observing whether the company can sustain its rapid growth and uphold its dominance in the AI industry.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Warren Takunda

Cryptocurrency

Solana's price is currently down by 10% on the weekly chart, with the altcoin nearly nullifying its gains from the previous week. The correction is taking place across the entire market, with the total crypto market cap down by 7.8% on Aug. 28. Why Is Solana (SOL) Price Down Today?_1

SOL/USD on the weekly chart. Source: Trading View

Solana has struggled to undergo a fresh uptrend since the beginning of April, as the price action has consolidated sideways over the past 5 months. While Solana-based PayPal stablecoin (PYUSD) has crossed a market cap of $1 billion, onchain activity and demand on Solana have progressively dropped over the past few weeks.

Solana open interest drops b 12% in 24 hours

Solana's open interest (OI) has declined by 12% over the past day. SOL’s 16% price drop in August has coincided with a weakening derivatives market, with OI dropping from a high of $2.83 billion to $2.08 billion. Why Is Solana (SOL) Price Down Today?_2

Solana Open Interest chart. Source: Coinglass

Liquidations amassing above $15 million over 24 hours further aggravated bearish pressure, as over $13 million in long positions were wiped out.

SOL spot holders are selling

Another reason for SOL's current bearish premise is negative spot net flows over the past month. Solana has suffered $526 million in spot selling volumes, which is the third largest among the top ten crypto assets.

Moreover, while spot netflow is negative for all assets, SOL has witnessed the largest selling pressure relative to market cap. Why Is Solana (SOL) Price Down Today?_3

Crypto Spot Netflow chart. Source: Coinglass

For example, Bitcoin's spot negative netflow is almost thrice as high as Solana's, but its market cap is also 17 times larger. Hence, spot investors are relatively selling more SOL than BTC.

Solana may drop another 12% in the coming week

Since the beginning of April, Solana has oscillated sideways for over 70% of the time period. This particular range between $162 and $127 has largely acted as the accumulation zone, and SOL has regularly tested the upper limit and lower limit over the past 5 months. On a couple of occasions, it breached above $162, only to drop back within range in ten days.

After the flash crash at the beginning August, the altcoin tested the upper limit of $162 twice, and the traders were hopeful that previous weeks’ retest would trigger a new bullish leg.

That did not pan out, and based on historical market behavior, SOL will potentially retest $127 in the next few days, which is the lower limit of the accumulation zone. Why Is Solana (SOL) Price Down Today?_4

SOL/USD on the daily chart. Source: Trading Vie

However, it is important to note that each correction down to $127 has taken place within a week of SOL breaking under $150 on previous lows.

If the SOL/USD pair is able to close the daily candle above $140 for next week, a drop down to $127 will likely be avoided. There is also support from the 200-day EMA, which means SOL has a legitimate chance of recovery.

Source: Cointelegraph

Risk Warnings and Disclaimers

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Kevin Du

Forex

The Mexican Peso (MXN) trades higher in its key pairs on Wednesday amid a cautiously optimistic market mood. European equities are trading modestly higher and the increasingly held view that the US Federal Reserve (Fed) will be able to lower interest rates in an orderly fashion – avoiding disruptions to the economy – is further buoying investor risk appetite.

Several lower tier US data releases have come out over recent days that have painted a mixed picture and helped allay concerns the economy is heading for a hard landing. These include higher-than-expected Consumer Confidence in August and a surge in US Durable Goods Orders in July released Monday, though labor-market pessimism lingers and the Richmond Fed Manufacturing Index sank below estimates.

Mexican Peso faces pressure from political factors

The Mexican Peso, meanwhile, has been pressured in recent sessions by a revival of the debate over reforms the new Morean-led government is planning for the Mexican judiciary. The proposed changes would make judges and magistrates elected by popular vote; critics say this will undermine justice, democracy and investor confidence in Mexico. ¡

Monday saw the new reforms voted through a committee for debate in the lower house in September when parliament opens, according to ABC News. Disagreement over the reforms has led to public demonstrations in Mexico City by members of the judiciary. The US ambassador to Mexico, Ken Salazar, said the “popular direct election of judges is a major risk to the functioning of Mexico's democracy.”

Salazar’s criticisms have led the Mexican government to “pause” diplomatic relations with both the US and Canada. If the stand-off escalates there is the potential for it to negatively impact free trade between the three countries with negative implications for the Mexican Peso. This would especially be the case should former-President Donald Trump win the presidential election.

The breakdown in diplomatic relations comes at a time where Mexico stands to potentially benefit from an escalating trade war between North America and China. News on Tuesday revealed, Canada has decided to increase tariffs on Chinese electric vehicle (EV) and steel imports, by 100% and 25%, respectively.

The decision could benefit Mexico, however, because of its existing role as an intermediary manufacturer of Chinese EVs. These, destined for North America, are not subject to punitive tariffs because of the free-trade agreement that exists between the US, Canada and Mexico, according to Bloomberg News.

Source: FXSTREET

Risk Warnings and Disclaimers

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Owen Li

Forex

The AUD/USD pair holds onto gains near the round-level figure of 0.6800 in Wednesday’s European session. The Aussie asset posts a fresh seven-month high of 0.6813 after a hotter-than-expected Australian monthly Consumer Price Index (CPI) for July kept market speculation for the Reserve Bank of Australia (RBA) to leave its Official Cash Rate (OCR) steady at 4.35% for the entire year alive.

The inflation date came in the early Asian session on Wednesday and showed that monthly CPI decelerated to 3.5% from 3.8% in June but remained higher than expectations of 3.5%, which appeared insufficient to bring RBA rate cut expectations on the table.

This week, the Australian Dollar (AUD) is expected to show more action as Aussie monthly Retail Sales data for July is lined up for release on Friday. Economists estimate that Retail Sales, a key measure of consumer spending that prompts price pressures, to have grown at a slower pace of 0.3% from 0.5% in June.

Meanwhile, the US Dollar (USD) regains temporary ground after posting a fresh year-to-date (YTD) low. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, delivers a mild recovery from 100.50 to near 100.85.

Investors see the US Dollar’s recovery as a short-lived pullback, with evidence that its near-term outlook is uncertain. The Greenback has remained under pressure as the Federal Reserve (Fed) seems to be prepared to start reducing interest rates from the September meeting, with uncertainty over the likely size by which the central bank will cut its key borrowing rates.

For fresh cues on interest rate cut path, investors await the United States (US) core Personal Consumption Expenditure Inflation (PCE) data for July, which will be published on Friday. The PCE Price Index report is expected to show that the annual core inflation rose by 2.7%, faster than June’s reading of 2.6%, with monthly figures growing steadily by 0.2%.

Source: FXSTREET

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Stocks

Asian shares were mostly lower Wednesday, despite a record high on Wall Street, as investors awaited a closely watched earnings report from Nvidia.

Japan’s benchmark Nikkei 225 edged up 0.2% in afternoon trading to 38,352.07.

Toyota stock jumped 3.7% after Japanese media reported Japan’s top automaker was going to announce a cooperative agreement on fuel cells with European automaker BMW.

Fuel cell vehicles are ecological, running on electricity produced when hydrogen and oxygen combines to form water. Japanese business daily Nikkei reported a partnership will be announced next week.

Toyota Motor Corp., often criticized as falling behind the global push in electric vehicles, is a longtime proponent of fuel cells.

Australia’s S&P/ASX 200 was little changed, inching up less than 0.1% to 8,071.40. Australia’s headline index of inflation for July fell less than expected, down 3.5% from the previous year.

South Korea’s Kospi declined 0.2% to 2,684.41.

Hong Kong’s Hang Seng, which has been rising steadily in recent sessions, dipped nearly 1.0% to 17,700.81. Analysts believe the higher-than-expected China’s industrial profits reported this week isn’t great enough to maintain the optimism. The Shanghai Composite dipped 0.6% to 2,832.59.

All eyes are on the upcoming Nvidia earnings report. Big tech companies like Nvidia have become extremely influential lately, if not overblown, with the artificial intelligence company’s total market value topping $3 trillion.

Nvidia reports its latest results on Wednesday. It rose 1.5% on Tuesday and has made a 159% gain this year.

“That’s the major question, and I think all eyes will be on Nvidia as they report this week,” said Bill Merz, head of capital markets research at U.S. Bank Wealth Management. “That’s kind of the elephant in the room, so to speak, that many investors will focus on.”

Also high on investors’ watch is the expectation for the Federal Reserve to cut its main interest rate at its next meeting in September. Investors are looking ahead to Friday, when the U.S. government releases its latest data on inflation with the PCE, or personal consumption and expenditures report, for July.

On Wall Street, the Dow Jones Industrial Average rose 9 points, or less than 0.1%, which was good enough for its second all-time high in two days. The index is on an eight-day winning streak.

The benchmark S&P 500 and Nasdaq composite each finished 0.2% higher after drifting between small gains and losses most of the day. The benchmark S&P 500 is now within 0.8% of its record high set last month. Slightly more stocks closed lower than those that posted gains on the New York Stock Exchange.

In a bit of positive news, the Conference Board, a business research group, said its U.S. consumer confidence index rose to 103.3 in August from 101.9 in July. Consumer spending accounts for nearly 70% of U.S. economic activity.

All told, the S&P 500 rose 8.96 points to 5,625.80. The Dow rose 9.98 points to 41,250.50, and the Nasdaq gained 29.05 points to close at 17,754.82.

Treasury yields held steady in the bond market. The yield on the 10-year Treasury rose to 3.83% from 3.82% late Monday.

In energy trading, benchmark U.S. crude was unchanged at $75.53 a barrel. Brent crude, the international standard, stood unchanged at $79.55 a barrel.

In currency trading, the U.S. dollar rose to 144.53 Japanese yen from 143.91 yen. The euro cost $1.1140, down from $1.1188.

Source: AP

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Thomas

Forex

Scope for Australian Dollar (AUD) to edge higher, but any advance is likely limited to a test of 0.6815. In the longer run, outsized advance suggests further AUD strength; given the overbought conditions, it remains to be seen if 0.6870 is within reach, UOB Group FX strategists Quek Ser Leang and note.

The 0.6870 resistance may be out of reach

24-HOUR VIEW: “AUD traded between 0.6762 and 0.6796 yesterday, higher than our expected sideways trading range of 0.6750/0.6790. The price action has resulted in a slight increase in upward momentum. Today, there is scope for AUD to edge higher, but any advance is likely limited to a test of 0.6815. The major resistance at 0.6870 is unlikely to come under threat. On the downside, a breach of 0.6760 (minor support is at 0.6775) would indicate that the current mild upward pressure has eased.”

1-3 WEEKS VIEW: “Our update from Monday is still valid. As indicated, while the outsized advance from last Friday suggests further AUD strength, given the overbought conditions, it remains to be seen if 0.6870 is within reach in the next 1 to 2 weeks. On the downside, if AUD breaks the ‘strong support’ at 0.6730 (level previously at 0.6710), it would suggest that it is not strengthening further.”