EU CONSUMER STAPLES: Consumer: Week in Review

• FRBNY EFFR for prior session:
  • Daily Effective Fed Funds Rate: 3.62% (+0.00), volume: $133B
  • Daily Overnight Bank Funding Rate: 3.62% (+0.00), volume: $257B
• US TSYS: Repo Reference Rates
  • Secured Overnight Financing Rate (SOFR): 3.63% (-0.02), volume: $3.148T
  • Broad General Collateral Rate (BGCR): 3.61% (-0.02), volume: $1.295T
  • Tri-Party General Collateral Rate (TCR): 3.60% (-0.03), volume: $1.275T
  • (rate, volume levels reflect prior session)

Canada posted weak productivity growth alongside elevated compensation in Q1. Overall labour productivity fell 0.5% Q/Q after -0.3% in Q4 2025, for the third decline in 4 quarters and leaving productivity down 0.6% Y/Y. 

• Hours worked in the business sector rose 0.4% (following 2 consecutive declines) with jobs up 0.1%; recall  that GDP fell 0.1% in Q1.
• A 0.9% Q/Q rise in hourly compensation means unit labor costs rose 1.4% Q/Q (0.4% prior), easily the fastest rate since 2023, leaving them up 3.2% Y/Y.
• In a notorious chronic issue for the Canadian economy, productivity has effectively stalled in the 2020s. By comparison: US productivity is up almost 14% since the end of 2019; Canadian productivity a little over 1%. Consistently increases in US hourly compensation narrows the differential, but there's still a gap: Canadian ULCs are up 26%; in the US, 21%.
• The Bank of Canada is optimistic that future productivity gains will at least offset demographic deterioration, however.
• The April Monetary Policy Report noted that "The current level of potential output is above the estimated range from the April 2025 Report. Upward revisions to historical data for Canadian gross domestic product (GDP) and the capital stock, combined with an assumed positive impact from AI, suggest somewhat stronger trend labour productivity." However the estimated rate of potential output growth was  revised lower, with 2026 at 1.2% (1.3% prior), 2027 1.3% (1.4% prior), and 2028 1.5% (1.7% prior), reflecting weaker trend labor input growth (softer population/labour force growth) overall despite upped productivity (and despite US tariffs weighing).
• The BOC may be basing its assessment in part on the latest business outlook survey pointing to firms' plans to make productivity-enhancing investments, and possibly a change in the demographic mix in the labour force over time, but there is plenty of work to do. All else being equal, a rise in longer-run productivity growth implies upside pressure on the neutral rate (in  April, the BOC reaffirmed that its estimate of the range was 2.25-3.25%, and the current overnight rate sits right at the bottom).

“*IRAN NUCLEAR RISK SEEN HIGHER THAN BEFORE TRUMP ATTACKS BEGAN

*IAEA CITES PROLIFERATION RISKS IN REPORT SEEN BY BLOOMBERG” BBG