IMF boosts global outlook and downgrades outlook for Canadian GDP
http://www.financialpost.com/news/Canada+growth/4158929/story.html
(See below for an explanation of GDP and CPI).
· TSX +89.01 to 13,347.58 The Bond yield watch is on! Traders are looking ahead to the release of Canadian consumer price index (CPI) data on Tuesday, which is expected to show the annual inflation rate climbed to 2.5 percent in December, while price increases excluding food and energy costs were more subdued. The report could offer hints on whether the Bank of Canada, mandated to keep inflation at the midpoint of a 1 to 3 percent range, is likely to push back or bring forward rate hikes.
· DOW +108.68 to 11,980.52
· Dollar +.08c to 100.54c USD as a lack of drivers kept trading light ahead of a slew of key economic news later this week.
· Oil -$1.24 to $89.87 USD per barrel
· Gold +$3.50 to $1344.50 per ounce
Canadian 5 yr bond yields markets -.01bps to 2.59. The spread (based on the NEW MERIX 5 yr rate published rate of 3.99%) is now in the lower end of the comfort zone at 1.40.
http://www.tmxmoney.com/HttpController?GetPage=BondsAndRates&Language=en
What is Consumer Price Index?
The Consumer Price Index (CPI) is an indicator of changes in consumer prices experienced by Canadians. It is obtained by comparing through time, the cost of a fixed basket of commodities purchased by consumers. Since the basket contains commodities of unchanging or equivalent quantity and quality, the index reflects only pure price change
What is GDP and why is it so important?
The gross domestic product (GDP) is one the primary indicators used to gauge the health of a country's economy. It represents the total dollar value of all goods and services produced over a specific time period - you can think of it as the size of the economy. Usually, GDP is expressed as a comparison to the previous quarter or year. For example, if the year-to-year GDP is up 3%, this is thought to mean that the economy has grown by 3% over the last year.
Measuring GDP is complicated (which is why we leave it to the economists), but at its most basic, the calculation can be done in one of two ways: either by adding up what everyone earned in a year (income approach), or by adding up what everyone spent (expenditure method). Logically, both measures should arrive at roughly the same total.
The income approach, which is sometimes referred to as GDP(I), is calculated by adding up total compensation to employees, gross profits for incorporated and non incorporated firms, and taxes less any subsidies. The expenditure method is the more common approach and is calculated by adding total consumption, investment, government spending and net exports.
As one can imagine, economic production and growth, what GDP represents, has a large impact on nearly everyone within that economy. For example, when the economy is healthy, you will typically see low unemployment and wage increases as businesses demand labor to meet the growing economy. A significant change in GDP, whether up or down, usually has a significant effect on the stock market. It's not hard to understand why: a bad economy usually means lower profits for companies, which in turn means lower stock prices. Investors really worry about negative GDP growth, which is one of the factors economists use to determine whether an economy is in a recession.
GDP = C + G + I + NX
where:
"C" is equal to all private consumption, or consumer spending, in a nation's economy
"G" is the sum of government spending
"I" is the sum of all the country's businesses spending on capital
"NX" is the nation's total net exports, calculated as total exports minus total imports. (NX = Exports - Imports)
(courtesy of Barb Morgan, DBD Ontario SouthWest)
