Adjustment to low oil prices not going to plan

Although the economy likely grew strongly in the first quarter, beneath the surface we aren’t convinced that the economy is still struggling to adjust to lower energy prices, despite the weaker exchange rate. Growth in the tradable sectors isn’t overshadowing the non-tradable sectors, despite shrinking real domestic income. GDP growth continues to be bolstered by record household borrowing and spending, which only reinforces our view that the Bank of Canada will have no other choice but to keep interest rates lower for longer.