Gross domestic product, income and expenditure, second quarter 2024

Economic

Summary:

Real gross domestic product (GDP) increased 0.5% in the second quarter after rising 0.4% in the first quarter.

Real gross domestic product (GDP) increased 0.5% in the second quarter after rising 0.4% in the first quarter. Higher government final consumption expenditures, business investment in engineering structures and machinery and equipment, and household spending on services in the second quarter were moderated by declines in exports, residential construction and household spending on goods.

On a per capita basis, GDP fell 0.1% in the second quarter – the fifth consecutive quarterly decline.

Government spending rises on higher wages

Government expenditures rose 1.5% in the second quarter, as there were increases in compensation of employees, which is an expense for governments, and hours worked across all levels of government. Purchases of goods and services in the federal as well as in provincial and territorial governments also rebounded in the second quarter from a decline in the first quarter.

Higher business investment in machinery and equipment and engineering structures

Business spending on machinery and equipment increased 6.5% in the second quarter, led by higher spending on aircraft and other transportation equipment and parts. This coincided with increased imports of aircraft and ships.

Business investment in non-residential structures increased 0.5% in the second quarter due to higher spending on engineering structures, primarily in the oil and gas sector. Business investment in non-residential building construction fell 1.2%, as investment in commercial and industrial structures declined.

Business spending on intellectual property products edged up 0.3% in the second quarter, mainly due to increased spending on mineral exploration and evaluation (+4.5%).

Household spending slows in second quarter

Growth in household spending slowed to 0.2% in the second quarter after rising 0.9% in the first quarter. Higher expenditures for rental fees for housing, food and electricity led the increase in the second quarter. Meanwhile, fewer purchases of new trucks, vans and sport utility vehicles as well as reduced expenditures by Canadians abroad tempered overall growth.

Population growth outpaced the increase in household spending in the second quarter, and, as a result, per capita household expenditures fell 0.4% after rising 0.3% in the first quarter.

Weakening net trade, as exports decline more than imports

Exports of goods and services fell 0.4% in the second quarter after rising 0.5% in the first quarter. In the second quarter, lower exports of unwrought gold, silver, and platinum group metals as well as of passenger cars and light trucks and refined petroleum energy products were moderated by higher exports of crude oil and bitumen.

Imports of goods and services edged down 0.1% in the second quarter after recording no change in the first quarter. Lower imports of industrial machinery, equipment and parts, commercial services and refined petroleum energy products led the decrease in the second quarter, while higher imports of passenger cars and light trucks tempered the overall decline.

Residential construction continues to decline, falling in eight of the last nine quarters

Housing investment was down 1.9% in the second quarter, the largest decline since the first quarter of 2023. The decrease in the second quarter of 2024 was driven by lower investment in new construction (-1.6%), as work put in place for single-family dwellings and apartments fell, primarily in Ontario. Renovations fell 2.6%, and ownership transfer costs, which represent the resale market, declined 1.1%, led by less activity in Ontario.

Gross domestic product deflator up on higher prices for services

The GDP deflator rose 1.1% in the second quarter, led by higher prices for household consumption of services.

The ratio of the price of exports to the price of imports—the terms of trade—fell 0.1% in the second quarter as growth in import prices outpaced the growth in export prices.

Compensation of employees rises

Compensation of employees rose 1.6% in the second quarter after increasing 1.5% in the first quarter. Growth in the second quarter was led by increased wages in health care and social assistance, educational services and finance and insurance. Retroactive payments associated with arbitration decisions for members of the Ontario Secondary School Teachers' Federation and Elementary Teachers' Federation of Ontario were a large contributor to the wage growth in educational services. Among all industries, wages and salaries in mining and oil and gas extraction (+5.6%) had the strongest growth in the second quarter.

Household saving rate up on higher wages

The household savings rate reached 7.2% in the second quarter, as gains in disposable income outpaced increases in nominal consumption expenditure. Disposable income gains were mainly from wages and salaries.

Growth in investment income slowed in the second quarter, rising 2.8%, mainly on higher interest received and dividends. At the same time, household property income payments, comprised of mortgage and non-mortgage interest expenses, rose at a faster pace (+5.7%) compared with the first quarter (+4.1%). The Bank of Canada announced a cut to the policy interest rate at the beginning of June, followed by a further cut in July; however, many mortgage borrowers are still facing relatively higher renewal costs following the rate hikes that began in early 2022.

Higher income households tend to earn greater share of investment income than lower income households, while lower income households tend to have interest expenses that represent a greater share of their disposable income.

Corporate incomes

In the second quarter of 2024, total corporate incomes (i.e., gross operating surplus) rose 3.1% after falling 5.6% in the first quarter. In the second quarter, the operating surplus of non-financial corporations rose 3.1%, with gains in the oil and gas extraction sector, while financial corporations surplus rose 2.9%.

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

Bitcoin traded near $59,000 on Sept. 3 after a last-minute comeback delivered 3.2% daily gains.

Bitcoin Price Nearly Hits $60K but Traders Still See Bearish September_1

BTC price: “Green” first week could be September outlier

Data from Cointelegraph Markets Pro and TradingView showed promising BTC price action before the week’s first United States trading session.

Weakness around the monthly and weekly close did not last long, as despite a US market holiday, BTCUSD spiked to highs of $59,800 overnight.

“Constructive closes & confirmations, looking pretty good now,” popular trader Skew summarized in his latest analysis of the 4-hour chart on X.

Bitcoin Price Nearly Hits $60K but Traders Still See Bearish September_2

Skew noted that the price needed to complete various prerequisites to confirm upward continuation, among them a reading above 50 on the 4-hour relative strength index (RSI). At the time of writing, this was at 48.9.

“Going forward would want to see the monthly open bought by passive buyers on pullbacks,” he added.

Bitcoin Price Nearly Hits $60K but Traders Still See Bearish September_3

Having started off in classic style, traditionally “red” September now began to look more interesting to market participants.

Fellow trader Daan Crypto Trades thus considered the odds of a mixed month ahead.

“So consensus is: September Bad, Q4 Good. What if: September insanely good, Q4 more chop/bleed. Now that would be pretty typical for this cycle,” part of an X post read.

In further analysis, he nonetheless acknowledged that “even in the bad months, the first week was green more often than not.”

Bitcoin Price Nearly Hits $60K but Traders Still See Bearish September_4

Others saw standard behavioral patterns, albeit with a bullish outcome waiting in the wings.

“Dull market, which is usually the end stage before the party begins,” Michaël van de Poppe, founder and CEO of trading firm MNTrading, continued.

“Regarding price action on $BTC: You'd really need to get a breakout above $61K to get the momentum back in the markets, otherwise, we continue to have this downward trend for a while.”

Bitcoin Price Nearly Hits $60K but Traders Still See Bearish September_5

Bitcoin, gold face familiar challenge

In its latest market bulletin to Telegram channel subscribers, trading firm QCP Capital warned that gold, which set a new all-time high last month, may join crypto heading downward.

This status quo could remain in place until October, which has historically been much more bullish.

“September is typically a bearish month not just for crypto but across all asset classes (with bonds lower in 8 out of the last 10 Septembers and Gold lower every year since 2017),” it wrote.

“October, however, has the strongest bullish seasonality, with BTC showing positive returns and an average gain of 22.9% in 8 out of the last 9 Octobers.”

QCP concluded that “if this pattern plays out again this year, it would be strategic to accumulate during the September dip and take profits in October or toward the year-end.”

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Source: Cointelegraph

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SAXO

Economic

Commodity

It is all about the labour market

It has been made clear by several FOMC voting members that the Fed is gradually shifting its focus from inflation to the labour market. This means that the Fed, which was also indicated by Fed Chair Powell at the Jackson Hole event, is now in preparation for lowering its policy rate starting at the meeting on 18 September. The lower inflationary pressures in the economy allow room for lowering the policy rate. That is clear by now. The so-called “descent speed” will be determined by incoming data points on the labour market and in that regard this week is particularly interesting.

This week is the last batch of broad labour market data that the Fed will have on their hands before deciding on its policy rate later this month. At this point, the market is leaning in clear favour of a 25 basis point rate cut which seems appropriate given the current information picture. The broad labour market data such as the ADP employment change on Thursday and Nonfarm Payrolls on Friday are often lagging indicators confirming, or not, previous trends observed in other time series. The JOLTS job openings data on Wednesday is more interesting and a measure we know the Fed is looking at when analysing the US labour market.

Job openings relative to the number of unemployed people in the economy is one measure of labour market tightness and well correlated with the subsequent wage pressures which again can explain inflationary pressures. This measure of labour market tightness is showing that tightness has eased the past two years to levels observed in the year ahead of the pandemic. If the labour market tightness stabilises at this level the Fed can go more slowly unless some external factor or other risk source hits the economy. The JOLTS data we get in two days is for July and thus this time series is lagging by one month. If one wants a faster weekly series the US Indeed job postings data is more timely. Here we see basically the same trend some indications of stabilization although this picture can quickly change.

Investors are getting more sure about lower interest rates

The market is convinced that the Fed will move its policy rate lower by 225 basis points by January 2026 reaching the proximate neutral rate. However, the economy is still exhibiting trend growth at around 2% real GDP growth. That is of course no guarantee for a recession not coming soon as the economy was also growing close to trend growth when the US recession officially started in December 2007. It confirms that the Fed is more confident that inflation is reasonably under control. The big question is how much pent-up demand there is stored in the interest rate parts of the economy. This is one of the reasons why the Fed might go slow in the beginning to see how the economy reacts.

Another way of looking at the coming rate cycle is through the lens of financial conditions. These measure how easy it is to obtain financing and refinancing of debt. Financial conditions adjusted for the strength of the economy are right at the average since early 2010 and quite loose in a longer historical context. Financial conditions were at higher levels and deteriorating in all rate cut cycles since early 1990 except for the rate cut in 2019. Financial conditions were a lot tighter in the period 1971-1984 when the Fed was battling inflation back then, and compared to today it could be risky for the Fed to move too aggressively.

The market wants significantly lower interest rates and it will for sure get it, but the speed and depth of interest rate cuts are still very uncertain. Also because the US election in November could be an important factor for the economy in 2025 and beyond.

Commodities and real estate are two different worlds right now

It has been a while since we have covered the macroeconomy and asset allocation. As the table below shows, this quarter has been very unusual in the sense that we are observing a very wide spread in performance between real estate stocks (+9.2%) and commodities (-7.1%). The stories driving this spread are the market’s narrative of substantially lower policy rates over the next 16 months.

As we have recently shown in our expected returns table on sectors, the real estate sector is still the least attractive given that the sector is still raising equity capital to fund itself which is negative from a shareholder perspective. One thing is lower policy rates, but if the long-term inflation premium remains sticky then the lower policy rate will only lead to a flattening yield curve and not substantially lower long-term financing yields which are what the real estate sector needs.

Commodities have staged a comeback through August. We are still positive on commodities longer term as India will increasingly play a positive role on marginal demand as the country urbanises. The green transformation in the developed world will also continue to be positive for metals such as aluminum and copper. Will the Market Get What It Wants?_3

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

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NAR

Data Interpretation

Economic

Pending home sales in July retreated 5.5%, according to the National Association of REALTORS. All four U.S. regions posted monthly losses in transactions. Year-over-year, the Northeast rose while the Midwest, South and West registered declines.

The Pending Home Sales Index (PHSI)– a forward-looking indicator of home sales based on contract signings – slipped to 70.2 in July, the lowest reading since the index began tracking in 2001. Year over year, pending transactions were down 8.5%. An index of 100 is equal to the level of contract activity in 2001.

"A sales recovery did not occur in midsummer," said NAR Chief Economist Lawrence Yun. "The positive impact of job growth and higher inventory could not overcome affordability challenges and some degree of wait-and-see related to the upcoming U.S. presidential election."

Pending Home Sales Regional Breakdown

The Northeast PHSI waned 1.4% from last month to 64.6, an increase of 2.4% from July 2023. The Midwest index reduced 7.8% to 67.8 in July, down 11.4% from one year ago.

The South PHSI sank 6.5% to 83.5 in July, falling 11.5% from the prior year. The West index shrunk 3.8% in July to 56.2, down 6.0% from July 2023.

"In terms of home sales and prices, the New England region has performed relatively better than other regions in recent months," added Yun. "Current lower, falling mortgage rates will no doubt bring buyers into market."

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

Commodity

Brent oil prices declined on Tuesday as sluggish economic growth in China, the world's biggest crude importer, increased demand concerns while a halt to Libyan production and exports provided a floor.

Brent crude futures fell 92 cents, or 1.2%, to $76.62 a barrel by 0814 GMT.

West Texas Intermediate crude futures, which did not settle on Monday because of the U.S. Labour Day holiday, were down 25 cents, or 0.3%, at $73.30.

"The weaker than expected Chinese manufacturing PMI over the weekend likely exacerbated concerns about the Chinese economy's performance," said Charalampos Pissouros, senior investment analyst at brokerage XM

"The Libya and Middle East stories are keeping a floor below prices, leaving the door open to a further recovery in the foreseeable future."

On Monday China reported new export orders fell for first time in eight months in July and that prices of new homes rose in August at their weakest pace this year.

In Libya, oil exports at major ports were halted on Monday and production curtailed across the country, six engineers told Reuters, continuing a standoff between rival political factions over control of the central bank and oil revenue.

So far there is limited upside support from large production disruptions in Libya, owing to the uncertainty over how long those outages might last, said UBS analyst Giovanni Staunovo.

Libya's National Oil Corp (NOC) declared force majeure on its El Feel oilfield from Sept. 2.

Total production had plunged to little more than 591,000 barrels per day (bpd) as of Aug. 28 from nearly 959,000 bpd on Aug. 26, NOC said. Production was at about 1.28 million bpd on July 20, the company said.

Some supply is set to return to the market as eight members of OPEC and affiliates, together known as OPEC+, are scheduled to boost output by 180,000 bpd in October. The plan is likely to go ahead regardless of demand worries, industry sources said.

A prolonged Libyan outage could support Brent prices in the mid-$80s even with additional supply coming on the market in the fourth quarter, RBC Capital analyst Helima Croft said in a note.

Continuing disruptions to supply flows from the Middle East are also supporting the market. Two oil tankers were attacked on Monday in the Red Sea off Yemen but did not sustain major damage.

Source: Reuters

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ING

Central Bank

Economic

EUR rates nudge higher as focus turns to the US

It’s a decisive week for rates given the data that is lined up in the US. Releases will kick off with the ISM manufacturing today, which is seen improving slightly but staying in contractionary territory. The focus is especially on the employment component ahead of the payrolls figure later this week. With the inflation issue seen as largely tackled, it is the state of the jobs market that will determine the rates outlook, and the more near term is the size of the Fed’s first rate cut that is expected this month – a 25bp is the market's base case, but there is still a 25-30% chance of a larger 50bp cut in the pricing.

Monday of course was a US holiday. And left to their own devices EUR rates nudged up by 4bp with the 10Y Bund yield above 2.34% again, the highest since late July. Front-end rates still rose by 2-3bp, including the pricing for the October rate cut, where the probability for a consecutive cut following one in September was pared back to below 40%. Given the ECB’s emphasis on relying more on its forecasts again, we still think this is exaggerating the chances of that happening.

In terms of eurozone data, we saw some upwardly revised manufacturing PMIs, but observing the slight bear steepening of the curve we think the busy primary markets could be more to blame. This year's issuance activities have picked up somewhat earlier than usual after the summer break with the past one to two weeks seeing a busy slate of issuance across sectors. In Govies and SSAs we saw Finland and Austria come to the market with new bonds last month. In SSAs, we saw ESM yesterday and EFSF the week with both now having completed their funding for 2024.

Issuance kicked off earlier post summer break

Source: BondRadar, ING

Today's events and market view

US ISM data will be today’s highlight. The manufacturing component is expected to nudge up from 46.8 to 47.5. The consensus sees the prices paid index fall slightly from 52.9 to 52.0, which reflects easing price pressures. From the eurozone, we have the change in Spanish unemployment for August and the ECB’s Joachim Nagel will speak at a banking event.

Issuance includes Austria auctioning a 9Y and a 62Y ultra-long RAGB, totalling €1.4bn. From Germany, we have €4.5bn worth of 2Y Schatz.

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

Risk Warnings and Disclaimers

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FxPro

Cryptocurrency

Market Picture

The crypto market rose 2.3% in 24 hours to reach a cap of $2.07 trillion, growing steadily throughout Monday. This recovery has yet to improve sentiment, with the index remaining at 26 for the third consecutive day.

Bitcoin is trading just below $59K at the start of active trading in Europe, having reached $59.7K at the peak of the Asian session. Despite intraday fluctuations, the BTC exchange rate has closed in the $59.0-59.3K range for the past six days, reflecting the balance of power. The local initiative remains with the bears, as the price is below the 50- and 200-day moving averages, and close to the lower boundary of the descending channel.

Tron remains in a corrective phase, having fallen to $0.1525. In August, the price soared from $0.1160 to $0.1680, flying from the lower to the upper boundary of the ascending corridor since the beginning of 2023. The current correction is helping to ease overheating and attract new buyers, but a dip below $0.1430-0.1480 would set a more cautious tone.

News Background

According to CoinShares, crypto fund investments fell by $305 million last week after three weeks of inflows. Bitcoin investments fell by $319 million, Ethereum by $6 million and Solana by $8 million.

QCP Capital notes Ethereum’s significant decline in August compared to BTC, as well as the underperformance of spot ETFs in the US, and warns that the market’s decline could continue in September.

According to Santiment, the number of bitcoin wallets with a minimum of 100 BTC rose to 16,120, a 17-month high. Experts believe that increased wallet activity is a positive signal for the market. Bitgrow Lab notes that historically, significant whale purchases have often preceded new all-time highs in bitcoin.

According to BiTBO, bitcoin miners’ revenue fell to its lowest level in 11 months in August. The dynamics were affected by an increase in complexity and a decrease in the number of transactions.

The Cardano network successfully passed the Chang hardfork, marking the beginning of the Conway registry era and the ecosystem’s transition to decentralised governance. ADA token holders will be able to participate in a vote to determine the future of the network.

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