CIBC Economic's "The Week Ahead"

The American economic Thanksgiving table isn’t yet graced with a horn of plenty. But the bounty that is there seems enough to dispel any real worries about double-dip recessions. US Q3 growth was revised up to 2.5%, and several indicators hint that the fourth quarter won’t be any worse than that.



Key Numbers to watch this week:



Canada – Real GDP - Q3 (Tues – 8:30AM) – Canada is set to post its second quarterly deceleration in growth since the recovery. We expect Q3's GDP had a modest ascent of 1.6%. September’s muted performance means a modest handoff to Q4, and with the external picture remaining soft, another quarter of sub-2% growth is in the cards.

US – Non-Farm Payrolls - November - (Fri - 8:30AM) – With census-related layoffs in the rear-view mirror, US payroll gains are now back in triple-digit territory. After the prior month’s consensus-topping 150K net job additions, we’re anticipating a repeat performance in November, as suggested by the apparent downward trend in the weekly initial jobless claims.



Equity Insights:



Driven entirely by gains on the domestic side, US corporate profits rose by 2.8% in sequential terms or by some 28% from year-earlier levels to set a new record in Q3.

While capital spending is likely to slow from the torrid pace seen earlier in the year, a glance at another useful indicator suggests a collapse is unlikely. Much of the equipment used in America’s factories these days is made abroad and capital goods imports have continued to rise strongly in recent months.

Recent gains in Canadian earnings have been driven by the non-financial sector, the opposite of the pattern seen stateside. On a seasonally adjusted basis, non-financial earnings were up by 0.8% from the preceding quarter in Q3, vs. a 3.7% decline for financial entities.



Currency Currents:



In line with an appreciating Canadian dollar, Canada's net inbound travel showed a rare improvement in Q3, coinciding with the loonie's first losing quarter in over a year.

Many have taken the rise in Spanish yields and CDS rates following the Irish debacle to be an indication of “contagion” in European financial markets. However, the run-up in Spanish borrowing costs is not a sign that Spain has “caught” Ireland’s bug, but that it is nursing its own illness.

With infl ation trending above target for the second straight month, the Banco Central do Brazil is under pressure to raise rates. But the central bank has been holding off, expecting earlier tightening and moderated global activity to eventually weigh on growth.