Happy new year.

 

Overseas, Europe has had a relatively mild start to the winter and it has resulted in reduced demand for heating. Consequently, natural gas prices in the region have fallen significantly, and now sit at levels last seen before Russia invaded Ukraine.  Should trends continue over the months to come, the lower energy prices could provide some disinflationary tailwinds in the region.

 

Meanwhile, in China, there has been a stark reversal of the country’s “zero-Covid” policy, with a complete abandonment of the measures the country had been taking for the past few years. Rather than enforcing strict lockdowns, the country is now in the process of reopening despite the reported increase in infections and strain on its healthcare system. This may result in some temporary disruption from worker absenteeism and supply chain challenges.  Nevertheless, it should prove temporary, and the prospects for a recovery in Chinese economic growth look promising.

 

Closer to home, Canada’s economy added 104,000 jobs in December, more than expected, and its unemployment rate fell to 5.0%. Meanwhile, in the U.S., the employment report showed 223,000 jobs were added in the month, also higher than expected, with the unemployment rate falling to 3.5%. The rate of job creation remains healthy and normal. In addition, the CPI inflation reading for December was released and suggested an ongoing moderation in pricing pressures. Overall, the data suggests the Canadian and American economies are demonstrating resilience in the face of tightening financial conditions.

 

I view these recent developments as positive and expect the focus to shift to fourth quarter earnings and guidance.

 

Enjoy your weekend.

 

Tim