A wild and wooly one today as markets digested economic news in both Canada and the United States.

Here in the Great White North, inflation eased in November, albeit only slightly. The 6.8% annual pace was down from 6.9% in the prior month, but a tick above the consensus forecast (6.7%). A decline in gasoline prices on the month, and an easing in the annual inflation rate in that category, drove the overall deceleration. However, partly offsetting that, food price inflation accelerated modestly. Excluding food/energy, prices rose by a seasonally adjusted 0.3% month-over-month in November which, while softer than some of the big moves seen earlier in the year, still isn't consistent with a 2% inflation target. The Bank of Canada's CPI-median rate also accelerated slightly on the month (5.0% vs 4.9%), although CPI-trim was unchanged from October (5.3%). Even with the slight upside surprise, the October and November prints combined leave inflation running below the Bank of Canada's October MPR forecast (7.1%) for quarter four as a whole. Even though that deceleration in inflation is largely a gasoline price story at this stage, we still see the Bank pausing its hiking cycle and leaving rates on hold at the next meeting in January, although there is one more CPI print to come between now and then and it would be nice to see signs of deceleration in core measures. My thoughts on yesterday’s inflation numbers are this: A slightly firmer reading driven by mortgage interest costs is still in keeping with the Banks view that prior rate hikes are working their way through and curtailing domestic demand (ditto for the other major driver yesterday: food prices). Remember that we still have another CPI print left (January 17^th) before the next Bank of Canada meeting on January 25^th.

Down in the States, Wall Street’s major averages closed lower as investors worried that data showed a resilient economy that would lead the Fed to keep hiking interest rates for longer than feared. The final estimate of third quarter growth was for 3.2% annualized growth, above the previous estimate of 2.9%. Meanwhile, the Labour Department said filings for unemployment benefits rose to 216,000 last week but were below economists’ estimates of 220,000.

In the Eurozone, we expect tightening to continue. Summarizing De Guindos interview with Le Monde, 50bps hikes are the norm now, and rates will rise into restrictive territory. Also, that he sees inflation falling into quarter two and remaining around 7% by mid-2023. French president Macron calls on Europe to reduce reliance on the United States for security.

Over in the United Kingdom, the final quarter three GDP numbers are marked a tick lower than expected at -0.3% quarter-over-quarter (largely as consumption was weaker than initially thought). A survey done by the British Chamber of Commerce shows that UK firms feel that the Brexit trade agreement hasn’t helped in two years. Meanwhile, the Financial Times reports that property prices in central London have fallen by 24% in real terms over the past five years (versus 5% for the rest of the UK).

Please note that while Mike will be relaxing in Metchosin over the next week, the rest of the team will be on deck to handle everything that comes up over the Christmas break.