New UWES articles, CPI data, and more!
Written By: Benjamin Pipicelli, Lexx Thomson, & Dorje Gyaltsen
Economics Newsletter – June 2, 2023
Canada’s Economy at a Glance
Canadian GDP Stronger than Expected
The Canadian economy has continued a better-than-expected start to 2023. As of May 31, 2023, annualized growth is at a rate of 3.1%. Which is above the Bank of Canada’s (BoC) latest forecasts of 2.5 and 2.3 percent. Most forecasters are predicting another rate hike but it is likely, the BoC will want to see more data before they make that decision rather than hiking next week.
Net trade was a significant growth driver for the first quarter of 2023. We saw a surge in exports but also sluggishness in imports. The economy-wide inventory-to-sales ratio held firm and remains levels above the lows seen during the post-pandemic supply chain issues. Final domestic demand looked much stronger than in the last quarter of 2022, specifically consumer spending. The consumer spending growth rate was 5.7 percent. There was also solid growth in services and durable goods. Good such as cars are finally being delivered with the supply chain back intact.
The first quarter of 2023 ended on a weaker footing than it started, the flat reading for March GDP was still slightly better than the forecast of -0.1%. Mining, oil, and gas were the main positives for March’s GDP. These positives offset the drags from manufacturing and tourism.
The positive implications for the financial markets in April were an increase in bond yields and the Canadian dollar gain versus the US dollar.
News and Noteworthy
Nvidia reaches $1 trillion market valuation with new AI wave
Just this Tuesday, Nvidia (NVDA) became the first microchip company to reach a market valuation of $1 trillion joining the leagues of Microsoft, Alphabet, Amazon, and Apple. Their stock rose more than 5% during the session but eventually closed out at $401.11, giving the company a market cap of $992 billion. This significant growth comes after Nvidia unwrapped their new AI-centric products on Monday establishing the company’s intention to take advantage of the generative AI wave. Their new supercomputer would allow video game development to take advantage of generative AI which would help in creating data like images, videos, audio, text, and of course 3D models. Read more.
Biden shores up Democrats and McCarthy scrambles for GOP support
The debt ceiling and budget cuts package is heading toward a crucial U.S. House vote as President Joe Biden and Speaker Kevin McCarthy assemble a coalition of Democrats and Republicans. President Biden plans to send top White House officials to meet at Capitol in order to garner support ahead of voting. Speaker McCarthy also works to gather the support of fellow skeptical Republicans to avert a potentially disastrous U.S. default which would shatter the $24 trillion market for Treasury debt and ignite an international crisis. Read more.
Canada’s economy grew more than expected in Q1
Canada’s economy grew 3.1 percent in the first quarter of the year with Statistics Canada saying that it was a stronger increase than what analysts at the Bank of Canada had expected, as household spending bounced back. The increase in economic growth could add pressure on the Bank of Canada to consider hiking rates again when the central bank issues its rate decision next week. CIBC Capital Markets senior economist Andrew Grantham noted that the growth does raise the odds of a rate hike but that it will be unlikely during their decision next week. He says that the central bank will most likely “wait to see more data and revise their forecasts before making a final decision.” Read more.
India as Tesla’s next big EV frontier?
A high-ranking delegation team from Tesla recently met with Union Commerce Ministry officials in New Delhi, discussing potential opportunities in India’s growing electric vehicle (EV) market. Tesla’s efforts to penetrate the Indian market have been ongoing for two years but why? Driven by its ambitious plan to ramp up production to 20 million electric cars annually by 2030, a huge leap from the 1.3 million units sold in 2022. To achieve this, Tesla needs to establish numerous Gigafacotories worldwide. The company also aims to diversify its dependency on China for its production and sales. Market analysts believe that the EV landscape in India could change dramatically in the next few years, creating a significant opportunity for Tesla. Read more.
Ukraine’s economy shows ‘resilience’ from Russian attacks
Ukraine’s economy displays “remarkable resilience” following Russian attacks on its electricity infrastructure, officials from the International Monetary Fund said on Tuesday as they signed off on an initial loan of $900 million and raised their estimate for the country’s economic growth. Inflation is coming down and the hryvnia currency looks stable despite the massive disruption of the war, says IMF’s mission chief Gavin Gray. But he also warned that the economic outlook faces “exceptionally high risks.” Read more.
Economics Society News, Events, and Articles
– Welcome to the Spring ‘23 term at UWES!!!
– Keep an eye out on our Instagram page @UWEconSoc for updates regarding future events
– Check out our latest original article, The Great Leap Sideways – Chinese Industrialization Under Mao Zedong written by Finn O’Connor!
– Our stock contest will be starting on June 1st. Please see the preliminary standings below.