Quick Data Review

The economic reports for Canada and the US have been off consensus. We briefly discuss these and the implications.

1. Canada's jobs report looked worse than it was. The Canadian dollar dropped on the news, but the BoC will not be swayed by the optics and it will retain its hawkish rhetoric. The Bloomberg consensus has looked for a minor 6k job growth. Instead Canada reported a 30.4k decline. Yet this was due to the decline (51.6k) in part time jobs. Full time jobs actually grew 21.3k, which would be roughly the equivalent of 210k job creation in the US. The tick up in the unemployment rate is a function of a decline in the participation rate. The Canadian dollar remains among the strongest currencies this week, gaining about 0.5% against the dollar, second only the Norwegian krone (0.75%). Momentum traders have helped drive the euro to new record lows against the Canadian dollar today.

2. US import prices fell by 0.6% in July. The consensus was for a 0.2% increase. Import prices are now off 3.2% year-over-year. This is not all due to fuel imports as ex-fuels, imported prices fell 0.4%, the third consecutive monthly decline. The risk then is that PPI, due out next Tuesday, is weaker than the 0.2% increase the consensus expects. The good news though may reverse when we get the August reading as energy prices rebounded. Export prices rose 0.5%, recouping a chunk of the 1.7% decline in June. The key here was the 6.4% increase in agriculture goods prices. Excluding farm and energy prices, export prices have fallen for three months.

3. The USDA crop estimate slashed the corn harvest to 10.779 bln bushels down from last month's estimate of 12.97 bln bushels. As of August 5, 69% of the Midwest was experiencing modest to exception drought conditions. Half of the corn fields are poor or very poor. The USDA raised the forecast for the wheat production. For the year that began June 1, the USDA estimates the US will produce 61.73 mln tons (2.268 bln bushels), which is 13% more than the previous year and 2% higher than the forecast it made last month. The USDA forecast the soybean harvest will be 2.692 bln bushels, down from 3.05 bln in 2011. Last month, the USDA had expected this year's harvest to be roughly the same as last year. In the immediate market response, corn and soy prices were higher and wheat lower.