Investors likely to focus on outlook for Canadian economy in short trading week

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Canada's bank headquarters are shrouded in fog as a sign displays TSX numbers on December 30, 2011. THE CANADIAN PRESS/Frank Gunn

TORONTO - The slowdown in Canada's economic growth will be in focus this week as traders digest the latest jobs numbers, along with a series of other domestic figures, which could provide further insight into how deep the problems lie.

A shortened trading week — the TSX is closed Monday for the Civic Holiday — will leave investors with plenty of data in a compressed timeframe, while they'll also keep an eye on uncertainty in Europe and the latest earnings numbers.

"The anaemic rate of Canadian economic growth is becoming a major concern, particularly when the chances are that growth will only slow further in the second half of this year," Paul Ashworth, chief U.S. economist at Capital Economics said in a note.

"The problem is that the headwinds are only getting stronger. The global economic slowdown has been more severe than even we feared," he added.

Expectations suggest the national unemployment rate will remain near 7.2 per cent for July when the data is released on Friday. The consensus target is for about 10,000 net new jobs, according to CIBC World Markets.

The schedule for economic data also includes July housing starts on Tuesday — which are expected to show that lower interest rates have supported growth in housing numbers, though some attention will be paid to signs that a slowdown could develop in the third quarter.

On Thursday, merchandise trade numbers are expected to show the trade gap widening to more than $1 billion for the first time in a year.

"After two consecutive monthly deficits, it’s tough to see what’s going to turn the tide for Canadian trade any time soon," Bank of Montreal deputy chief economist Doug Porter said in a note.

"Consider the list of factors working against exports in June—commodity prices were down heavily in the month, U.S. retail sales sagged again, and the Canadian dollar remained doggedly firm at just below par.

"Against that backdrop, we suspect exports likely took a tumble of more than two per cent, pushing trade into a deeper deficit," he added.

Traders will also have plenty of Canadian earnings data to chew on throughout the week with big names like Air Canada (TSX:AC.B) and BCE Inc. (TSX:BCE) reporting on Wednesday, as well as several food retailers and life insurance companies later in the week.

However, investors likely won't have any reasons to take major positions in the market this week.

"We're in the middle of the summer doldrums," Chris King, portfolio manager at Morgan, Meighen and Associates said in an interview.

"We don't really start to get some stronger activity until mid- to late-August as people start positioning (as they) get back to work."

North American stock markets endured a strong bout of pessimism last week, with just one higher close on Friday, as central banks in the U.S. and Europe opted not to take any new action to shore up the economy, as many investors had hoped.

It was only when a U.S. jobs report on Friday came in stronger than expect that markets began to move higher, backed by rising commodities.

In the United States, merchandise trade data is the only major report on the calendar, due Thursday. The June deficit could show a mild improvement, according to consensus expectations.