
The latest Bank of Canada interest rate decision saw a 25-basis point cut on its previous meeting, bringing the key policy rate to 4.25%. This marks the third consecutive rate cut in 2024, a response to weakening economic conditions, such as reduced consumer spending, contracting business investments, and stagnating economic growth. These factors contributed to a decline in demand, which the Bank of Canada is addressing through gradual rate reductions. The decision to cut rates aligns with the Bank of Canada’s forecast that inflation will continue to ease, having already shown signs of moderation. This strategy reflects the central bank’s focus on balancing inflation control with economic stability. As a result, economists widely anticipate further cuts. Markets are widely anticipated that the BoC may cut another 25 basis on the upcoming meeting unless there are significant shocks in inflation.
For September, the U.S. Manufacturing Purchasing Managers Index (PMI) 2024 came in at 47.3, down from 47.9 in August. Although it exceeds market expectations of 47.0, the reading remains below the 50 mark, which reflects ongoing contraction in the sector. This decline was driven by weak demand and persistent challenges in the manufacturing sector, such as reduced new orders, continued supply chain issues, and lower production activity. Following global uncertainty which may weigh on manufacturing, the upcoming data is expected to reflect continued softness in the PMI, hovering near current levels below the 50.0 mark.
The final S&P Global Services PMI for September 2024 came in at 55.2, revised slightly lower from the preliminary estimate of 55.4. This is a decrease from the August reading of 55.7 but still indicates strong expansion in the services sector. The growth was driven by solid new business, although firms remained cautious with hiring due to rising input costs, which increased at the joint-fastest rate in a year. The continued rise in input costs and weaker business sentiment might signal a slowing pace of expansion in upcoming releases.
In August 2024, U.S. Durable Goods Orders remained steady, reflecting no significant change after the previous month’s sharp rise of 9.8% in July. This major surge in July was the highest in four years, primarily fueled by large orders in the transportation sector, including aircraft and motor vehicles. Although the growth momentum slowed in August, the stable level of orders points to sustained demand. The unexpectedly strong July numbers raised hopes that the U.S. manufacturing sector may withstand broader economic headwinds. However, the upcoming data is expected to experience a slight cooling following the potential effects of global slowing growth that may weigh on business investments.
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