Filtered by Subscriptions: Canada Economics Use setting Canada Economics
The sharp fall in hiring intentions in the Bank of Canada’s Business Outlook Survey suggests that the 104,000 surge in employment in December is not a sign of things to come. The survey points to a slowdown in average monthly employment growth to just …
23rd January 2023
The CPI-trim and CPI-median measures of core inflation will be revised up next month but that does not change our view that they will fall sharply over the first half of this year. We think the 25 bp hike from the Bank of Canada next week will mark the …
20th January 2023
Retail sales appear to have ended 2022 with a bang Retail sales edged down in November but the preliminary estimate of a 0.5% m/m rise in December, despite the double-digit fall in gasoline prices, implies that sales volumes rose sharply at the end of …
Economic growth slowing and inflation falling But labour market still tight and inflation expectations too high Bank to drop down to 25 bp hike, but likely to add hawkish guidance The Bank of Canada is set to raise interest rates by a smaller 25 bp …
18th January 2023
House prices fall further despite lower new listings The large fall in new listings in December failed to prevent another sizeable drop in house prices, but the improvement in the sales-to-new listing ratio offers some hope that the downward pressure on …
17th January 2023
Encouraging signs despite elevated core inflation Although the annual rates of core inflation remain elevated, the three-month annualised rates of CPI-trim and CPI-median dropped back to 2.5% in December. Elevated inflation expectations mean that the …
Some encouraging signs despite elevated core inflation Unfavourable base effects mean that the small falls in CPI-trim and CPI-median inflation in December are better than they look. And with prices falling on the month for the first time since July 2020, …
Wage and price inflation expectations still too strong for comfort The Bank of Canada’s latest quarterly surveys leave no doubt that higher interest rates are weighing on demand, but still don’t show a convincing moderation in wage and inflation …
16th January 2023
Surge in motor vehicle sales fails to offset weakness elsewhere The easing of supply shortages provided a big boost to motor vehicle shipments in November, but this failed to offset falls elsewhere. While there is scope for transportation equipment …
The December CPI data and the Bank of Canada’s quarterly business and consumer surveys, released next week, could have a big bearing on the policy outlook. For the Bank to pause after one final 25 bp hike this month, as we assume, it will need to see …
13th January 2023
The activity and labour market data imply the economy carried more momentum into 2023 than we expected, but the weakness of temporary employment suggests cracks are showing beneath the surface. The revised preliminary estimate that GDP edged up by 0.1% …
10th January 2023
The resilience of the labour market is a risk to our view that the Bank of Canada will pause its tightening cycle after a final 25 bp hike this month, even as the slump in natural gas prices raises the chance that CPI inflation will fall faster than the …
6th January 2023
Surge in employment locks in another interest rate hike The surge in employment in December and renewed fall in the unemployment rate suggest that the Bank of Canada will raise interest rates again later this month, although the fall in wage growth …
Surge in employment locks in another interest rate hike The surge in employment in December and renewed fall in the unemployment rate suggests that the Bank of Canada will raise interest rates again later this month, although the fall in wage growth means …
Strong rental growth and higher mortgage costs will keep shelter inflation elevated for the next few months, but we expect it to fall sharply over the rest of 2023 as lower house prices feed through. Shelter inflation surprised to the upside of our …
5th January 2023
Lower commodity prices push goods trade into deficit Lower commodity prices have now wiped out the goods trade surplus, while the falls in export and import volumes present downside risks to the preliminary estimate that GDP edged up in November. The …
Goods trade balance moves back into deficit Lower commodity prices have now wiped out the goods trade surplus, while the falls in export and import volumes present downside risks to the preliminary estimate that GDP edged up in November. The merchandise …
The November CPI data were a mixed bag, with deflationary pressure on goods starting to feed through but strong price rises for several key services. The 3-month annualised measures of core inflation that the Bank of Canada follows will probably drop back …
23rd December 2022
Economy starting to lose momentum The modest gain in GDP in October and upward revision to activity in previous months suggest the economy was coping well with higher interest rates at the start of the fourth quarter, but the preliminary estimate that …
Economy beginning to lose momentum The modest gain in GDP in October and upward revision to activity in September suggest the economy was coping well with higher interest rates at the start of the fourth quarter, but the preliminary estimate that GDP was …
The renewed rise in the three-month annualised rates of CPI-trim and CPI-median inflation in November call into question the idea that the Bank of Canada has already finished its tightening cycle. Those rates are not published by either Stats Can or the …
21st December 2022
Upside surprise keeps the pressure on the Bank Overall inflation pressures were stronger than anticipated in November and the 3-month annualised measures of CPI-trim and CPI-median both increased. This supports our view that the Bank of Canada will err on …
Jump in rents drives upside surprise in inflation Overall inflation pressures were stronger than anticipated in November and support our view that the Bank of Canada will err on the side of hawkish caution with a final interest rate hike in the new year. …
Sales volumes struggling for momentum Retail sales volumes are struggling for momentum and, with the services spending indicators also showing some weakness, household consumption may be heading for a second consecutive quarterly contraction. The 1.4% …
20th December 2022
One third of the rise in household net worth during the pandemic has now been reversed and the further fall in house prices in November points to another deterioration this quarter. Lower net worth, in turn, is a headwind to consumption in 2023. Net …
16th December 2022
New listings fell in November but, because they are taking longer to sell, the inventory of homes for sale continued to rise. That is one reason to expect house prices to fall further, particularly if lenders fail to pass on the decline in wholesale …
15th December 2022
As several forecasters now seem to share our view that the economy will suffer a moderate recession next year, in this Update we discuss the risks that could result in a much deeper downturn. The key risk is that economists are underestimating the impact …
14th December 2022
Sales volumes continue to struggle The strong rise in manufacturing sales in October was largely due to a jump in refined petroleum prices. Manufacturing sales volumes were unchanged and the business surveys point to outright falls ahead. The 2.8% m/m …
The Bank of Canada’s 50bp rate hike this week means that variable mortgage rates are now more than 400bp higher than the start of the year. This raises the risk that some will be forced to sell their homes, although there was little evidence of …
9th December 2022
The Canadian dollar has underperformed most other currencies over recent weeks, and we expect it to depreciate further against the US dollar over the first half of next year. The loonie has been the worst performer among major currencies since the US CPI …
Overview – The economy is heading for a moderate recession, as higher interest rates weigh on domestic demand and exports contract amid the global downturn. Weaker demand, together with lower commodity prices and an easing of supply shortages, should …
8th December 2022
The Bank of Canada delivered a somewhat dovish 50bp rate hike today, by softening its explicit forward guidance that interest rates will need to rise further. Our GDP and inflation forecasts suggest there is little need for the Bank to raise rates …
7th December 2022
The end of the tightening cycle? The Bank of Canada delivered a somewhat dovish 50 bp policy rate hike today by softening its explicit forward guidance that interest rates will need to rise further. We would not rule out a final 25 bp interest rate hike …
Export volumes struggling despite boost from agricultural sector The essentially unchanged level of export volumes in October, despite big gains in agricultural and pharmaceutical exports, suggests the sector is struggling amid weaker global demand. …
6th December 2022
Export volumes struggling despite boost from agricultural sector The essentially unchanged level of export volumes in October, despite a big boost from higher agricultural exports, suggests that the sector is beginning to struggle amid weaker external …
The national accounts data provided two pieces of good news this week, with revisions to the historical series and stronger-than-expected third-quarter growth leaving GDP higher than expected. While some argue that this will cause the Bank of Canada to …
2nd December 2022
Unemployment rate declines despite slowdown in hiring The slowdown in hiring in November did not prevent a decline in the unemployment rate, as the labour force contracted. The Bank of Canada will be more encouraged by the fall in the 3-month annualised …
Unemployment rate declines despite slowdown in hiring The slowdown in hiring in November was not enough to prevent a renewed decline in the unemployment rate, as the labour force contracted. The Bank of Canada will be more encouraged by the fall in the …
Higher interest rates weighing on domestic demand Core inflation pressures eased in October Bank to drop down to 25 bp hike as it balances risks of over- and under-tightening The easing of the three-month annualised measures of core inflation in October …
30th November 2022
Domestic demand contracts for first time since Q2 2021 The stronger-than-expected gain in third-quarter GDP tips the odds slightly toward another 50 bp interest rate hike from the Bank of Canada next week. But, with domestic demand contracting for the …
29th November 2022
Domestic demand contracts for first time since 2021 The stronger-than-expected gain in third-quarter GDP tips the odds slightly toward another 50 bp interest rate hike from the Bank of Canada next week. But, with domestic demand contracting for the first …
Research from the Bank of Canada suggests that half of all variable-rate, fixed-payment mortgage holders have now hit their so-called trigger rates, which means their payments will rise. This is one factor weighing on spending, with retail sales volumes …
25th November 2022
The big surprise so far this year has been the resilience of housing starts which, despite falling from their 10-month high of 300,000 annualised in September, remained at a relatively strong 267,000 in October. While developers have largely shrugged …
24th November 2022
Although the annual rates of core inflation increased in October, we suspect the Bank of Canada will point to the declines in the 3-month annualised rates of CPI-trim and CPI-median to justify dropping down to a 25 bp interest rate hike at its meeting …
22nd November 2022
Retail sales struggling for momentum The small fall in retail sales volumes in September appears to have been reversed in October but, more generally, sales volumes have been little changed for the past six months and the low leve of consumer confidence …
Although the data this week showed renewed rises in the annual rates of CPI-trim and CPI-median inflation in October, our calculations show that the timelier 3-month annualised measures both declined. That could persuade the Bank of Canada to drop down …
18th November 2022
Weak new home sales weigh on housing starts The plunge in new home sales in Toronto in September points to further falls in housing starts, although there are at least some signs that the worst may be behind us for home sales and that the pressure on …
16th November 2022
Core inflation pressures better than they look Although the annual rates of CPI-median and CPI-trim edged up in October, the 3-month annualised rates that the Bank of Canada is now focussed on declined. As that for CPI-median is now in the 1% to 3% …
Core inflation pressures better than they look Headline inflation was unchanged at 6.9% in October and the CPI-median and CPI-trim measures of core inflation increased, but the latter was mainly due to unfavourable base effects. It appears that the …
Manufacturing sales volumes set to fall further Manufacturing sales volumes edged down in September and, with the business surveys continuing to weaken and inventory levels now looking unusually high, they are likely to fall further. We expect weaker …
15th November 2022
