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The large build-up in private sector debt over the last decade means that the Canadian economy is far more sensitive to interest rate rises than in the past. This increases the likelihood that the Bank of Canada’s rate hikes could trigger a potentially …
10th September 2018
While the Bank of Canada this week acknowledged the uncertainty created by the ongoing NAFTA negotiations, it also played down the risks of a further deterioration in trade relations. However, given the potential for US President Donald Trump to trigger …
7th September 2018
Although August’s sharp drop in employment simply reversed July’s gain, the concentration of losses in high-wage service jobs and construction is concerning. Coupled with a further slowdown in earnings growth, August’s Labour Force Survey presented few …
While the Bank of Canada left its interest rates unchanged today it appears to be heading for a hike in October, although a serious breakdown in the NAFTA negotiations could result in a last minute delay. … Bank likely to raise interest rates in …
5th September 2018
The unexpected narrowing of the trade deficit in July to just $0.1bn, from June’s $0.7bn, suggests that economic growth might hold up a bit better than we expected in the third quarter. … International Merchandise Trade …
While the US and Canada are aiming to reach a compromise over NAFTA today, at this stage it’s still unclear whether this will happen. Either way, next week the Bank of Canada will take the spotlight. The Bank looks set to keep policy unchanged, even if a …
31st August 2018
The strong pace of growth in the second quarter, and a NAFTA deal if it materialises by Friday, will embolden policymakers. Nevertheless, the Bank of Canada is still likely to keep to its commitment to proceed gradually with interest rate rises, by …
30th August 2018
Even if NAFTA negotiations are concluded successfully this week, the Bank of Canada is likely to wait until October before it raises interest rates. … Bank on pause ahead of October rate …
29th August 2018
Today’s announcement of a bilateral trade agreement is definitely good news for Mexico and the US, but could be good or very bad for Canada. More generally, it illustrates that, despite the Trump administration’s intransigence over trade disputes in …
27th August 2018
Consumer spending growth appears to have rebounded to about 2% annualised in the second quarter. But with real wage gains set to slow further, even that fairly-moderate growth rate seems unlikely to be sustained. … Spending growth set to …
24th August 2018
The merchandise trade deficit narrowed to a 17-month low of $0.6bn in June, thanks to a 4.1% monthly rise in exports and a small fall in imports. But both moves were largely due to big swings in aircraft trade. The big picture remains that non-energy …
23rd August 2018
While retail sales values and volumes both fell in June, over the second quarter as a whole growth rebounded. However, the slowdown in housing market activity and rising interest rates will limit sales growth in the second half of the year. … Retail Sales …
22nd August 2018
Headline inflation might surpass 3% in August, but by the end of the year it is likely to be little more than 2%. And with core inflation stable, the Bank is unlikely to pick up the pace of its tightening. … Inflation to drop back towards …
21st August 2018
The declines in commodity prices this week following the crisis in Turkey highlighted the connections that make Canada more vulnerable than many advanced economies to developments elsewhere in the world. While this week’s moves alone mean little for the …
17th August 2018
The jump in headline inflation to 3.0% in July, from June’s 2.5%, was partly due to rising energy prices but also appeared to reflect a pick-up in general inflationary pressures. We think that the Bank of Canada’s commitment to take “a gradual approach” …
June’s gain in sales was flattered by the energy sector, but the key take away is that another rise in unfilled orders bodes well for growth in the third quarter and suggests inflationary pressures are building. … Manufacturing Sales …
16th August 2018
The decline in the national rate of house price inflation to a five-year low of 1.8% in July is likely to be followed by further weakness in the months ahead. For now, house prices seem more likely to stagnate than to fall outright, but the risks arguably …
14th August 2018
A quick NAFTA deal is an upside risk to our forecast for the loonie to remain near its current rate against the US dollar this year. But our forecasts for various commodity prices to decline and interest rate differentials to move against Canada implies …
13th August 2018
The sudden escalation in political tensions between Canada and Saudi Arabia this week seems alarming, but investors are right not to fret about the consequences. After all, Canada sends just 0.2% of its exports to Saudi Arabia and financial links between …
10th August 2018
Although the 54,000 rise in employment in July blew the consensus out of the water, it was driven largely by temporary jobs, and average earnings growth dropped sharply. Despite the positive headline figure, today’s release does little to boost the chance …
Despite the recent stabilisation of some housing market indicators, steep falls in new home sales this year imply that construction activity will drop sharply over the coming 12 months. … Construction to drag down GDP …
9th August 2018
The economy’s strength towards the end of the second quarter is partly a bounce-back from earlier weakness and is therefore unlikely to be sustained. While the growing chance of a NAFTA deal being reached this month is an upside risk to our forecasts, any …
7th August 2018
Although May’s strong GDP growth partly reflected a rebound from earlier weakness, it was nevertheless encouraging and June’s trade data suggest that the economy ended the second quarter on a high note. With July’s Markit manufacturing PMI also suggesting …
3rd August 2018
Following June’s jump in exports and decline in imports, net trade appears to have made a decent positive contribution to GDP growth in the second quarter. But with a variety of factors likely to weigh on exports in the third quarter, it’s unlikely that …
Markit’s July PMI survey suggests that both GDP growth and inflation could increase to around 4% in the coming months. We doubt that either will rise that high, but the risks to the outlook seem to lie to the upside and the chance of the Bank of Canada …
1st August 2018
The consensus-beating 0.5% monthly rise in GDP means that growth over the second quarter as a whole looks to have been 3.0% in annualised terms. The Bank of Canada largely anticipated this strength, however, having pencilled in a 2.8% gain, so we doubt …
31st July 2018
The more conciliatory tone adopted by Washington in trade talks this week bodes well for the future of NAFTA. But with the US administration also confirming that Canada is viewed as a national security threat in some areas it’s clear that risks remain. … …
27th July 2018
The upward trend in core inflation over the past year is as much a reflection of past weakness as current strength. Core inflation looks set to remain near 2% in the coming months before dropping back in 2019. … Will core inflation continue to …
25th July 2018
Economic circumstances suggest that investment growth should be strengthening. Capacity utilisation is at a decade high, the unemployment rate is unusually low and wage growth is picking up. Machinery and equipment investment growth was very strong in the …
24th July 2018
The economy appears to have had a stellar month in May, with a potential monthly gain in GDP of almost 1% implying that growth over the second quarter as a whole was close to 3% in annualised terms. But May’s strong rise was heavily dependent on a one-off …
20th July 2018
The rise in headline inflation to a six-year high of 2.5% in June, from 2.2%, left it above the Bank of Canada’s forecast, while two of the Bank’s three measures of core inflation are now in line with the 2% target mid-point. As the Bank has only just …
New manufacturing orders have recently risen strongly and exporters are more optimistic than they have been in years. However, there are a number of reasons to doubt that an export revival is on the cards. … Are better times ahead for …
19th July 2018
Although manufacturing sales rebounded in May and the near-term outlook seems bright, the sector remains on track for a weak second quarter. In the longer-term, competitiveness issues and trade policy uncertainty are key risks to the outlook, particularly …
17th July 2018
The Bank of Canada appears increasingly confident in the economic outlook, but we think that its forecasts for GDP growth will prove to be too optimistic. Following this week’s increase in the policy rate to 1.50%, from 1.25%, the Bank believes that …
13th July 2018
The national rate of house price inflation slowed to a near-five-year low of 2.9% in June. With house price inflation in Vancouver now plummeting back down to earth, the national rate looks set to slow even further over the remainder of this year. … …
12th July 2018
Alongside its decision to raise the key policy rate from 1.25% to 1.50%, the Bank of Canada maintained a fairly hawkish tone in its policy statement. While this suggests that the Bank intends to raise interest rate further in 2018, we suspect that it will …
11th July 2018
The tariffs announced so far are unlikely to boost Canadian inflation by much more than 0.1% pt, while the effects on economic growth should also be small. We therefore doubt that they will have much bearing on tomorrow’s Bank of Canada monetary policy …
10th July 2018
The Bank of Canada’s policy announcement will take the spotlight next week. Despite June’s Labour Force Survey being something of a mixed bag, the subsequent rise in the Canadian dollar suggests that markets share our view that the rebound in employment …
6th July 2018
Although the unemployment rate rose and wage growth slowed in June, the construction-driven 32,000 increase in employment will soothe concerns about the housing market. Even with exports falling in May, the Bank of Canada is still slightly more likely …
Despite a host of negative developments since the Bank of Canada signalled in May that an interest rate rise was imminent, policymakers still seem eager to raise rates. While we now expect the Bank to hike next week, we think that its optimism is …
4th July 2018
June’s employment figures, due for release next Friday, will confirm whether the recent signs of weakness in construction were just a temporary blip, possibly weather-related, or something more troubling. … Is the construction sector in …
29th June 2018
Despite the slowdown in monthly GDP growth in April, the chance of the Bank of Canada raising interest rates next month has risen following the good performance by conventional industries at the start of Q2. … GDP by Industry …
The Canadian dollar hit a 12-month low this week, dropping to 75 cents against the US dollar. It started this year above 80 cents. Despite that decline, markets appear to be sanguine about the risks of a full-blown trade war with the US, since most of the …
22nd June 2018
The unexpectedly weak inflation and retail sales data released today support our view that the Bank of Canada will stand pat at next month’s policy meeting, particularly given the ongoing uncertainty over trade policy. … Consumer Price Index (May) & …
The Canadian yield curve has flattened to its lowest level since the run-up to the late 2008 recession but, unlike in the US, it is not an infallible indicator for predicting economic downturns. Moreover, it is an inversion of the curve rather than just a …
21st June 2018
The news earlier this week that household debt had edged down to 168.0% of disposable incomes in the first quarter, from 169.7% in the final quarter of last year, was greeted by some as confirmation that the Bank of Canada had somehow engineered a soft …
15th June 2018
The unexpected 1.9% m/m slump in manufacturing sales volumes in April is a blow to the Bank of Canada, since it suggests that economic growth has not picked up much after the disappointingly weak first quarter. That adds to the reasons for the Bank to …
The markets have dismissed the G7 trade spat between President Donald Trump and Prime Minister Justin Trudeau as much ado about nothing, which is understandable given the former’s infamously bellicose approach to negotiating. Nevertheless, the risk that …
12th June 2018
The strength of business investment has been one of the economy’s few bright spots over the past couple of quarters, but that surge in capex has done little to boost the economy’s still mediocre productivity performance. Furthermore, the survey evidence …
8th June 2018
One month of falling employment can be chalked up to the notorious volatility in the labour force survey, but two months? That’s not something the Bank of Canada can ignore, particularly not as the details suggest the slump in home sales has now spread to …
