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Bad but not awful Although the 0.2% m/m contraction in GDP in February was worse than expected, the preliminary estimate of a partial rebound in March should soothe fears that the economy is rapidly falling into recession. We expect GDP growth to slow …
30th April 2025
While higher lumber tariffs will not significantly impact GDP growth in the US or Canada, they will drive up costs for US homebuilders. As affordability is already stretched, it is unlikely that homebuilders will be able to pass these costs onto buyers in …
29th April 2025
Although the Liberals have just missed out on a majority, Prime Minister Mark Carney should still be able to implement his fiscal plans with support from the NDP or Bloc Québécois. If anything, the need to grant concessions to those parties means fiscal …
Both major political parties unveiled their election platforms over the past week, featuring their fiscal projections for the next four years. As expected, the Liberals have made little attempt to balance the budget. Incumbent Prime Minister Mark Carney …
25th April 2025
Slump in sentiment not yet weighing heavily on spending The moderate decline in retail sales volumes in February was probably due to the unseasonably severe winter weather rather than the recent slump in sentiment, with the latest flash estimate implying …
Markets were almost evenly split on what the Bank of Canada would do yesterday, right up until the last minute. In the end, the Bank opted to keep interest rates unchanged at 2.75%, rather than loosen policy by an additional 25bp. In his opening …
17th April 2025
The Bank of Canada’s decision to keep interest rates at 2.75% today was not a big surprise given recent above-target core CPI gains, concerns about tariff-induced price rises and uncertainty about the extent to which the economy requires additional policy …
16th April 2025
Bank holds but further cuts likely amid dovish communications The Bank of Canada’s decision to keep interest rates unchanged at 2.75% today was not a huge surprise given recent above-target gains in core prices, concerns about future price increases and …
Concerning signs for Canada’s housing market The housing market took another leg down in March, with the larger decline in single-family home prices suggesting that owner-occupiers rather than investors are behind the most recent weakness. Nonetheless, …
15th April 2025
Gasoline-driven fall in headline inflation The downward surprise to CPI inflation in March, along with the first target-consistent gains in CPI-trim and CPI-median in eight months, at the margin raise the odds of a rate cut by the Bank of Canada tomorrow. …
Canadians shun the US, but will they spend at home? It’s been two months since Canadians began boycotting US goods and services in the wake of the aggression from President Trump over tariffs and his apparent desire to make Canada the 51 st state. The …
11th April 2025
Downside risks to the economy that prompted March cut have eased Meanwhile, underlying inflation pressures are far too strong for comfort Bank likely to pause next week, but we still expect further cuts this year Despite the economy facing the existential …
10th April 2025
President Trump’s trade war has created material downside risks for the global economy. Our forecasts assume that tariffs on most countries outside China will stay at 10% and retaliation by other governments will be moderate. In this scenario, global GDP …
We have updated our forecasts for Canada to account for the latest changes in US trade policy. (See Table below.) A recession should be avoided, but the harsh tariffs on the vehicle sector and uncertainty about the future of the USMCA mean GDP growth is …
While Canada escaped “liberation day” relatively unscathed, the imposition of US tariffs and risk of more to come will still weigh on exports, consumer confidence and investment. With immigration also plunging, we now expect GDP to expand by just 0.4% …
9th April 2025
The Bank of Canada’s quarterly business and consumer surveys were nowhere near as bad as we feared, but that may only be because the survey periods preceded the most recent tariff announcements. Either way, it’s clear that those tariffs and uncertainty …
7th April 2025
Despite being one of the first targets in President Donald Trump’s crosshairs following his return to the Oval Office, Canada made it through “Liberation Day” relatively unscathed. We gave our full thoughts in a note published on Thursday. (See here .) …
4th April 2025
Tariffs not entirely to blame for employment fall While US tariffs will be the obvious culprit for the fall in employment in March, two-thirds of the decline was concentrated in the services sector, suggesting that other factors were at play. Nonetheless, …
We hosted two online Drop-In sessions on 3 rd April to discuss the fallout from President Trump’s Liberation Day tariff announcement. (See a recording here .) This Update contains answers to some of the questions that we received and links to several more …
3rd April 2025
Canada has escaped much more lightly than we feared from President Trump’s big announcement, with the import-weighted US tariff likely to be 8% based on current plans and potentially below 5% in the near future. Nonetheless, the much larger tariff rate on …
Tariffs knock trade balance back into deficit The large fall in exports in February was to be expected given the (albeit temporary) imposition of tariffs on goods imports into the US that month. While Canada may have gotten off relatively lightly on …
Hopes of making it a week without any new tariff news were dashed on Wednesday when President Donald Trump announced a 25% tariff on motor vehicle and parts imports from April 3 rd . Despite accounting for 10% of Canada’s goods exports to the US, the hit …
28th March 2025
Solid rise in GDP not a sign of things to come The stronger-than-expected 0.4% m/m rise in GDP in January, along with an upward revision to the December outturn, shows the economy still had solid momentum at the start of this year. The weak February …
Following the series of US tariff announcements in early April, we have revised our forecasts. You can find the updated forecasts here . Overview – We have raised our assumption for the average US tariff rate that Canadian exporters will face, to a level …
27th March 2025
In this Update, we answer several key questions about how the announced 25% tariffs on US imports of autos and parts might affect the global economy and the US itself. Mexico, Slovakia and Korea are most exposed with up to 1.6% of GDP at risk. But the …
It is becoming clear that President Trump’s actions are driven by both his fixation on reducing the US trade deficit and his transactional approach to dealing with other countries. So, even though the Trump administration’s ideas to transform the entire …
25th March 2025
Inflation at risk of takeoff On Tuesday we learned that headline inflation jumped to 2.6% in February, from 1.9%. While a rise had been expected given the resumption of GST in the middle of last month, broader price increases elsewhere in the economy …
21st March 2025
Consumption outlook deteriorating The sharp drop in retail sales volumes in January is not a major concern, coming off a massive GST holiday-driven surge the month before. The worry is that it could signal what's to come, with the preliminary estimate …
Upside surprise makes the Bank of Canada’s job even harder The large upside surprise to CPI inflation in February, together with another set of above-target consistent gains in CPI-trim and CPI-median, reduces the chance of the Bank of Canada cutting …
18th March 2025
While a notable shift in Canadian fiscal policy is likely regardless of who wins the upcoming election, we doubt this will move the needle for the loonie or Canadian government bonds, given that the outlook for Canadian financial markets depends more on …
Canada’s housing market falls victim to trade war While unseasonably severe winter weather has undoubtedly played some role in the recent weakness of home sales, we suspect the sharp drop in house prices in February can also be blamed on the growing …
17th March 2025
Trump torments Tiff The Bank of Canada’s decision to lower its policy rate by a further 25bp, to 2.75%, at its meeting on Wednesday was largely expected given the growing downside risks to the economy from US tariffs. While the temporary carveout …
14th March 2025
Strong start to the year not a sign of things to come The large rises in both manufacturing and wholesale sales volumes at the start of the year suggest that GDP may have done even better than the flash estimate of a 0.3% m/m rise in January, although …
Although the Bank of Canada cut interest rates by 25bp again today, it also warned that “monetary policy cannot offset the impacts of a trade war” and that it must guard against tariff-related rises in price inflation. This suggests that the Bank is …
12th March 2025
Bank cuts again but warns that it must protect against tariff-induced inflation Although the Bank of Canada cut interest rates by 25bp again today, it also warned that “monetary policy cannot offset the impacts of a trade war” and that it must guard …
The imposition of US tariffs and risk of more to come will weigh on exports, consumer confidence and investment. As a result, we now forecast weaker economic growth, with GDP expanding by just 1.0% annualised on average over the next four quarters. For …
11th March 2025
* This Focus features additional analysis added following the announcement of a snap election for April 28 th . * Recent shifts in the polls suggest new Liberal Party leader Mark Carney and Conservative Party leader Pierre Poilievre are both in with a …
10th March 2025
The US tariff exemption for USMCA-compliant goods still leaves considerable uncertainty for the economy because less than 40% of exports to the US last year were formally USMCA compliant. The share that could be quickly declared USMCA-compliant is likely …
7th March 2025
Weather rather than tariffs to blame for weak hiring The essentially unchanged level of employment in February was probably mostly due to the unseasonably severe winter weather during the survey reference week rather than the threat of US tariffs. …
Recent strength of GDP and employment data irrelevant amid existential tariff threat Even if tariffs soon lifted, Bank could cut by more than markets are pricing in this year If tariffs are sustained, Bank could eventually return interest rates to …
6th March 2025
Exports to the US reach a record high amid tariffs The huge increase in exports in January was in line with the timely advance US data released last week and implies US importers looked to front-run tariffs ahead of Donald Trump’s return to the Oval …
President Donald Trump's decision to grant a one-month exemption to the Big Three Automakers (Ford, GM & Stellantis) is something of a disappointment given the earlier heavy hints from his Commerce Secretary Howard Lutnick that more widespread relief was …
5th March 2025
The events of the past two weeks have called into question whether the US is severing ties not just with adversaries such as China but also allies, including Canada, Mexico and the European Union. This would radically alter the shape of the fractured …
4th March 2025
If the US tariffs remain in place, Canada will undoubtedly fall into recession. The limited decline in the loonie so far suggests markets are still pricing in a quick U-turn from the Trump administration. But even if the tariffs are soon lifted, their …
President Donald Trump’s has claimed that there is “no room left’ for Canada and Mexico to avoid the imposition of 25% across-the-board tariffs at midnight tonight and he has reportedly signed a separate Executive Order raising the tariff rate on Chinese …
3rd March 2025
Economy doing well ahead of tariff threats Fourth-quarter GDP growth of 2.6% annualised was much stronger than the 1.8% rate we and the Bank expected, while third-quarter growth was revised up to 2.2%, from the initially reported 1.0%. As a result, growth …
28th February 2025
This page has been updated with additional analysis since first publication. Revisions leave economy in a much better place The 2.6% annualised gain in GDP last quarter was much stronger than the Bank of Canada’s forecast for a 1.8% increase and was …
Underlying inflation picks up Headline inflation rose to 1.9% in January, from 1.8%, despite the partial GST/HST holiday that began in mid-December. (See here .) Excluding taxes, headline inflation climbed to 2.5%, providing a taste of what is to come now …
21st February 2025
GST holiday temporarily boosts sales The jump in retail sales in December was partly due to the GST holiday, but also reflected strong gains in sectors that were unaffected by tax changes. Nonetheless, with sales dropping back in January, this release …
The Bank of Canada has downplayed the recent stronger monthly increases in its preferred CPI-trim and CPI-median core measures, but we are not convinced by the Bank’s claim that these measures are overstating underlying inflation pressures. While the GST …
19th February 2025
