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Last Week’s Highlights

United States

  • The U.S. trade deficit narrowed to $38.5 billion in December – its smallest level in three-years.
  • Stronger-than-expected exports and weaker-than-expected imports will result in an upward revision to fourth quarter GDP growth when the second estimate comes out at the end of this month. We expect real GDP to have grown by 0.5% (annualized) rather than the 0.1% contraction initially reported.
  • With the strong hand-off at the end of 2012, U.S. exports are likely to rebound in the first quarter of this year. Firmed by trade, but held back by higher taxes, we expect real GDP growth to improve to 2.0% (annualized) in Q1 2013.


  • The Canadian labour market lost 22,000 net jobs in January and the unemployment rate edged down to 7.0%. January’s poor result should be seen as more of a pay-back for the outsized job gains seen in late 2012 when economic growth slowed. Job creation should come in around 10,000-20,000 in the next few months in a modest growth environment
  • At 160,600 units in January, housing starts came in at their lowest level since July 2009, down 18.5%. The sharp January decline is not that surprising following what is believed to have been an unsustainable pace of construction in 2012. Given the current cooling of the housing market in general, Canadians should not look to residential construction as a source of strength moving forward in 2013.
  • While Canada’s international trade deficit narrowed in December to $0.9 billion, both exports (-0.9%) and imports (-2.8%) declined, painting a discouraging picture of Canada’s economy at the end of 2012. Although December’s slip is hardly uplifting, export growth should bounce back in 2013 matching increased demand from the U.S.
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