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House price inflation close to a peak The Teranet measure of house price inflation accelerated to a 32-year high in July and is on track to pick up further in August. That should mark the peak but, with the sales-to-new listing ratio still elevated and …
19th August 2021
Re-opening and supply constraints lift inflation Inflation jumped to 3.7% in July as the coronavirus restrictions were eased and global supply chain issues pushed up goods prices. As the Bank of Canada’s preferred measure of core inflation was unchanged …
18th August 2021
Slow recovery in store for manufacturing sales Manufacturing sales started to rebound in June but, with the global semiconductor shortage set to ease only gradually, it is likely to be a slow recovery for manufacturing sales volumes. The 2.1% m/m rise in …
16th August 2021
A new paper from the Bank of Canada outlines some additional economic benefits of a new monetary policy framework, which could be a sign that there is a greater chance of the Bank adopting average inflation targeting this year than we have assumed. Every …
13th August 2021
Distortions to the data mean it is hard to gauge the current pace of wage growth, but the business surveys suggest it will soon head back to pre-pandemic levels. Given the Bank’s upbeat view on the outlook for productivity growth, it may not be too …
11th August 2021
Housing market continues to cool There was more evidence that the housing market is cooling this week, with home sales slipping to 12-month lows in seasonally adjusted terms in both Toronto and Vancouver. (See Chart 1.) In Toronto, sales fell by a further …
6th August 2021
Solid rebound in total hours worked shows impact of reopening The 94,000 increase in LFS employment in July was something of a disappointment given the lifting of coronavirus restrictions at the start of the month in many provinces, but the solid 1.3% m/m …
Goods trade surges to biggest surplus since financial crisis The merchandise trade position returned to surplus in June thanks to a massive 8.7% m/m surge in exports, which suggests that second-quarter GDP growth was even stronger than the 2.5% annualised …
5th August 2021
Our expectations for GDP growth and inflation this year are close to the consensus but, beyond then, we think both will be weaker than most expect. This is likely to feed through to a fall in the loonie and we have recently toned down our expectations for …
4th August 2021
Although inflation remained above the Bank of Canada’s 1% to 3% target range in June, the details of the release seem to support the Bank’s view that the high rate of inflation is due to transitory factors. The consumer price index rose by just 0.1% m/m …
30th July 2021
Growth to accelerate following second-quarter expansion of 2.5% The monthly data suggest that GDP expanded by 2.5% annualised in the second quarter, despite the lockdowns in April and May, and the likely 0.7% m/m gain in June will provide a strong …
The wildfires in British Columbia appear to have been more disruptive than we first thought, but GDP should still rise this month thanks to the easing of the coronavirus restrictions. The volume of rail freight carloads carried across the country …
29th July 2021
Inflation to rebound soon Consumer prices increased only marginally in June but, as firms’ selling price expectations are currently very elevated, we continue to expect inflation to rebound back toward 4% soon. The consumer price index rose by just 0.1% …
28th July 2021
As the recent decline in bond yields have been most pronounced at the long end of the curve, it is unlikely to trigger much of a renewed fall in five-year mortgages rates. We expect mortgage rates to increase in the coming years, which will contribute to …
23rd July 2021
Sales fell again ahead of June rebound Retail sales fell again in May but the preliminary estimate suggests they rebounded strongly in June as non-essential stores re-opened. Consumers may transition away from spending on goods as the restrictions on …
The introduction of new CPI weights will prevent inflation from rising by as much as in the US but, with firms’ selling price expectations continuing to increase, the risks to inflation still seem to lie to the upside. Last month, we highlighted how the …
22nd July 2021
Housing market to lose momentum in second half of the year House price inflation accelerated to 16% y/y in June but, with the sales-to-new listing ratio falling in recent months, price inflation will peak in the second half of the year. The 2.7% m/m rise …
20th July 2021
The Bank of Canada expects GDP to move above its pre-pandemic trend in 2023 but, given the potential for oil prices and residential investment to decline, we think its forecasts will prove too optimistic. Alongside its decision to keep the policy rate …
16th July 2021
Overview – The lifting of restrictions and ongoing policy support should translate into a sustained period of above-potential GDP growth, driven by consumption and business investment. We expect GDP growth of 6.3% in 2021 and 4.0% in 2022, followed by a …
15th July 2021
The Bank of Canada’s decision to continue tapering its asset purchases today came as little surprise and we continue to expect the Bank to bring the QE program to a close by the end of this year. With the Bank’s new GDP forecasts looking too optimistic to …
14th July 2021
Manufacturing still struggling due to shortages Manufacturing sales fell again in May as the global supply shortages continued to take their toll. While those shortages should ease in the second half of the year, the rebound in production is set to be …
The local real estate board data suggest that home sales fell further in June but, with new listings declining as well, house prices look set to keep rising. The data released this week showed that home sales fell by another 9% m/m in Toronto in June, …
9th July 2021
Easing of restrictions lifts employment, but hours worked disappoints The stronger-than-expected rise in employment in June confirms that labour shortages are not holding back the recovery, but the weakness in hours worked still suggests there are …
Economy has developed as expected, so Bank likely to announce further taper Bank to keep signalling interest rates on hold until at least second half of 2022 New measures of labour market slack may shed light on reaction function As it is widely …
7th July 2021
The sheer scale of the surge in residential investment since the pandemic means it now presents a key downside risk to the outlook. At best, the widely held assumption that residential investment will remain high for years looks too rosy. At worst, a …
6th July 2021
Consumers and firms expect rise in inflation to be temporary The Bank of Canada’s latest surveys show more evidence of inflationary pressures building but, given firms and consumers expect higher inflation to be temporary, the Bank is unlikely to be too …
5th July 2021
The upward revision in March and smaller-than-expected fall in April mean that GDP is now on track to surpass its pre-pandemic level in July, a couple of months earlier than we previously thought. This raises the chance that the Bank of Canada will …
2nd July 2021
Semiconductor shortage weighs on exports Exports were weaker than expected in May, but that was largely due to the ongoing global semiconductor shortage rather than weakening external demand. And with the rise in imports boding well for domestic demand, …
Canadian firms are not currently suffering from labour shortages to the same extent as those in the US but, with immigration still muted, the issue is likely to get worse as the economy continues to recover. The clearest sign that labour shortages are not …
30th June 2021
GDP not as weak as first thought The 0.3% m/m decline in GDP in April was smaller than Stats Can initially suggested and implies that, despite the third coronavirus wave, the economy held up relatively well. We now expect second-quarter GDP growth to be …
The dramatic fall in lumber prices over the past month has captured a lot of attention, but it is the more gradual rally in oil prices that is likely to have the greatest bearing on the economic outlook. That said, we are not convinced it will be …
25th June 2021
The latest CFIB Business Barometer shows that, as the re-opening process got underway, firms’ selling price expectations surged in June. Firms now expect to raise their prices by an average of 4.7% over the next 12 months, which is by far a record high. …
Sales fell sharply in April and again in May The recent lockdowns caused retail sales to plunge by 5.7% in April and the preliminary estimate implies they fell sharply in May as well. The outlook is much brighter, with the record level of consumer …
23rd June 2021
The introduction of new weights for the June CPI means that some of the item-specific price increases that we expect will not push up headline inflation by as much as we thought. Nevertheless, there still seems scope for inflation to rise to 4% over the …
18th June 2021
Housing, re-opening and supply constraints lifting inflation The rise in inflation to 3.6% in May was driven by several factors including ongoing global supply constraints, the booming housing market, and the start of the re-opening process. While …
16th June 2021
Struggling due to supply shortages Manufacturing sales volumes slumped 3.3% m/m in April, as the disruption from the global semiconductor shortage intensified. While sales volumes should gradually rise again from May, it will be some time before overall …
14th June 2021
The communications from the Bank of Canada this week confirmed that it is not worried about inflation surpassing its forecasts for this year, and that it remains committed to keeping the policy rate unchanged until economic slack is fully absorbed. …
11th June 2021
The Bank did not provide any new hints about the direction of policy in its statement today but, with GDP likely to start growing strongly again this month as the coronavirus restrictions are lifted, we expect the Bank to cut the weekly pace of its asset …
9th June 2021
Semiconductor shortage weighs heavily on trade The global semiconductor shortage weighed heavily on exports and imports of motor vehicles in April and this disruption continued in May. While exports elsewhere performed better, the broad-based weakness of …
8th June 2021
The latest data suggest residential investment, which rose to more than 10% of GDP in the first quarter, has already peaked. With the Bank of Canada meeting next week, the key issue for policymakers is to what extent future declines could weigh on the …
4th June 2021
Continued restrictions weigh on employment The continued coronavirus restrictions caused employment to fall for the second month running in May but, with re-opening now underway across the country, employment should rise strongly in the coming months. The …
Recent economic weakness should be offset by stronger third quarter Tone of policy statement likely to be similar to April Bank may signal further reduction in asset purchases likely at the July meeting Inflation surpassed the upper limit of the Bank of …
2nd June 2021
After strong Q1, growth appears to have slowed sharply in Q2 The first-quarter data confirm that the economy took the second coronavirus wave in its stride but, with the preliminary estimate showing that GDP fell in April, the third wave has been much …
1st June 2021
The re-opening plans set out in the last couple of weeks point to strong gains in GDP over the summer. Given supply constraints, we expect the increase in activity to result in higher inflation than most expect. Ontario, Quebec, British Columbia (BC) and …
28th May 2021
The jump in inflation to 3.4% in April was stronger than most forecasters expected and, with firms’ selling price expectations rising again in May, there seem to be further upside risks to inflation over the rest of the year. We expect inflation to …
27th May 2021
Over the next few years, there is potential for increased “green” investment to more than offset the negative economic effects of measures such as further carbon tax hikes. But given the economy’s reliance on fossil fuel extraction, it is hard to take …
26th May 2021
The latest Financial System Review (FSR) suggests that the Bank of Canada’s concerns about high house price inflation are a key risk to our view that it will wait until early 2023 before raising interest rates. The FSR highlighted that, despite the fall …
21st May 2021
Strong end to Q1 but sales hit hard by lockdowns in April After reaching a record high in March, the preliminary estimate suggests that the lockdowns caused retail sales to slump in April. There is likely to be only a small rise this month given stores …
The Bank of Canada has voiced concern about the loonie although, following the signs of emerging inflationary pressures in April, it will probably be more welcoming of the disinflationary impact of the strong currency. Either way, the Bank’s concern about …
20th May 2021
Inflationary pressures emerging The large 0.6% m/m seasonally-adjusted rise in prices in April shows that the jump in inflation to 3.4% was not due to base effects alone. With firms’ selling price expectations elevated, we expect inflation to remain close …
19th May 2021
