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The economy’s reliance on trade with the US means that the current US presidential election campaign could be pivotal for Canada’s export outlook. The big question is whether a President Trump would follow through on the anti-trade rhetoric the nominee is …
5th August 2016
The B.C. government’s announcement last week that it intends to impose a 15% tax on home purchases by foreign investors is unlikely to topple Vancouver’s housing bubble. … Tax on foreign investors won’t pop Vancouver …
29th July 2016
Monthly GDP fell by a bigger-than-feared 0.6% m/m in May, as the Alberta wildfires triggered a massive slump in oil sands production. … GDP by Industry …
The sharp drop in oil prices and the Canadian dollar have led to a rapid deterioration in Canada’s economic outlook, overwhelming the ability of policymakers to stabilise the economy with conventional stimulus. We expect GDP growth to be less than 1% in …
27th July 2016
This is the week that we will finally discover just how badly the economy was hit by the Alberta wildfires in May, which caused the shutdown of the majority of oil production in the Fort McMurray area. Our calculations point to a 0.3% m/m decline in …
22nd July 2016
The surprisingly resilient 0.2% m/m gain in retail sales in May, which was above the consensus forecast of no change, means that monthly GDP probably only contracted by 0.3% m/m despite the disruption caused by the Alberta wildfires. In volume terms, …
The decline in the unemployment rate to an 11-month low of 6.8% in June, from 7.1% as recently as April, is not as good as it looks. It went down primarily because people gave up looking for work not because they found jobs. As a result, the participation …
15th July 2016
The 1.0% m/m decline in manufacturing sales in May was only partly due to the Alberta wildfires and that nominal decline was flattered by a rebound in energy prices. In volume terms, sales fell by a much bigger 2.1% m/m in May, adding to fears that …
After a brief surge at the start of this year, GDP growth has already slowed markedly in recent months. (See Chart.) Unfortunately, the recent limited rebound in commodity prices won’t be enough to prevent a continued decline in investment. Non-energy …
14th July 2016
The Bank of Canada shocked no-one with its decision to leave its key policy rate unchanged at 0.50% today, but we still anticipate that it will eventually be forced to cut rates again, probably in the first half of next year, as the lacklustre performance …
13th July 2016
When the next edition of Charles Kindleberger’s Manias, Panics and Crashes is released , Canada’s housing market will warrant its own chapter. According to Teranet , the 11-city house price index increased by 2.3% m/m in June and the annual growth …
The latest Bank of Canada surveys support our view that falling business investment, particularly in the oil and gas sector, will weigh on the economy in the second half of the year. Making matters worse, non-energy exports have barely risen at all in …
8th July 2016
The 700 decline in employment in June was below consensus expectations of a 5,000gain, in part because of a fall back in the number of public administration workers asthe majority of temporary census-related hires in May were no longer working inJune. …
Despite an apparent return to below-potential GDP growth and the financial market turmoil triggered by the UK's decision to leave the EU, we expect the Bank of Canada to leave its policy rate unchanged at 0.5% at the upcoming meeting (Wednesday 13 th …
6th July 2016
The merchandise trade deficit was broadly unchanged at C$3.3bn in May, thanks in part to an upward revision to the April figure. Despite the disruptions to oil sands production from the Alberta wildfires, energy exports still edged up slightly. However, …
The UK referendum vote to leave the European Union has triggered a renewed turmoil in financialmarkets, but we doubt the decision will damage Canada’s economy in any meaningful way. Despitethe strong cultural and historical links, exports to the UK amount …
30th June 2016
The muted 0.1% m/m gain in real GDP in April, while in line with consensus expectations, is disappointing since it follows contractions in both February and March. Furthermore, the raging wildfires which forced the closure of a significant chunk of oil …
This week we expect to learn that monthly real GDP increased by a muted 0.1% m/m in April. Given that GDP contracted in both February and March, however, that would represent a disappointing rebound. Furthermore, we are braced for a potentially big drop …
24th June 2016
The news last week of a further acceleration in house price growth in Toronto and Vancouver in May followed hot on the heels of the warning from Bank of Canada Governor Stephen Poloz that “the potential for a downturn in prices in these markets… is …
17th June 2016
Core CPI inflation dropped back only slightly to 2.1% in May, from 2.2%, but it should decline more markedly in the second half of this year, as the inflationary impact from the earlier slump in the Canadian dollar fades and the weak domestic economy …
Despite the rebound in oil prices this year, domestic energy producers don’t appear to believe in a sustainable recovery judging by the further decline in oil & gas drilling rig activity. Falling investment in the oil & gas industry more generally …
10th June 2016
While the employment gain of 13,800 in May and drop in the unemployment rate to 6.9%, from 7.1%, was better than most had expected, this was entirely due to hiring in the public sector, partly related to the national census. The details showing job losses …
The recent pick-up in consumer spending growth suggests at first glance that households are in a position to carry the economy once again this year. But closer examination of the underlying trends in labour income tell otherwise. Admittedly, households …
3rd June 2016
The merchandise trade deficit narrowed by a smaller margin than expected in April, mostly due to a tepid rebound in export volumes. Given the potential for a decline in energy exports in May, it now looks like exports were a big drag on the economy in the …
The pick-up in GDP growth in the first quarter might convince some that the worst effects of the oil price shock are over, but the details showed that business investment fell further, consistent with weaker intentions for this year. With the economy …
31st May 2016
After a strong start to the year, the economy likely ended the first quarter badly and we now believe that it shrank significantly this quarter, partly because of significant disruptions to oil production caused by severe wildfires in Alberta. More …
27th May 2016
Despite a serious downgrade to its views on second quarter economic activity, the Bank of Canada opted to hold interest rates at 0.50% today and to remain neutral on the rate outlook, clinging to its hope that growth will rebound in the second half of the …
25th May 2016
The rise in the core inflation rate in April, to 2.2% from 2.1%, was slightly stronger than expected but still appears due to the past depreciation of the Canadian dollar. As the weakness in the economy takes over as the primary driver of inflation later …
20th May 2016
We expect the Bank of Canada to hold interest rates at 0.50% next week and maintain a neutral outlook for future policy changes. Despite stronger economic growth at the start of the year and the rebound in oil prices, forward looking indicators on …
18th May 2016
The dangerous wildfires that broke out in Alberta earlier this month haven’t changed the dismal outlook for economic growth this year. As the increasing amount of survey evidence indicates, the much bigger and more lasting problem is the ongoing weakness …
13th May 2016
The modest decline of 2,100 in employment in suggests that the economy is still struggling to cope with lower oil prices. The unemployment rate was unchanged at 7.1%. We still believe that the worst isn’t over and expect the Bank of Canada eventually to …
6th May 2016
Despite a 25% m/m rebound in crude oil prices, the much larger than expected merchandise trade deficit in March suggests that the underlying momentum in the economy was weaker than widely assumed. This supports our view that GPD growth will be a meagre …
4th May 2016
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 …
29th April 2016
Although incoming data indicate that first-quarter GDP grew by as much as 2.8% annualised, we doubt this marks the beginning of an upturn in economic growth prospects. Economic growth in that quarter was boosted by a surge in energy exports, even as the …
26th April 2016
Canada’s economy certainly has its growth challenges ahead, but the recent rally in the Canadian dollar isn’t a major threat to the economic growth outlook, partly because it has been accompanied by a rebound in oil prices, which is a positive. …
22nd April 2016
The rise in the core inflation rate in March, to 2.1% from 1.9%, was stronger than expected but appears mainly due to the past depreciation of the Canadian dollar. As the weakness in the economy takes over as the primary driver of inflation later this …
Even after allowing for the sharp decline in the value of petroleum sales, the 3.3% m/m drop in manufacturing sales in February was twice as large as expected, with the drop in sales volumes hinting that industrial production weighed heavily on GDP …
15th April 2016
The strength of recent monthly GDP data has prompted some forecasters to revise up their growth forecasts for this year as a whole. But predictions of an acceleration in growth are, to our minds at least, at odds with the broader evidence. The economic …
The Bank of Canada’s decision to hold interest rates at 0.50% and to remain neutral on the rate outlook was largely in response to the improvement in economic growth early this year, fiscal stimulus measures and the rebound in oil prices. We still think …
13th April 2016
Despite glimmers of a revival in production, the mood among businesses across most sectors and regions has darkened due to shrinking real incomes and weak domestic demand, with the low level of confidence more consistent with a shrinking economy. This …
8th April 2016
Despite February’s decline in export volumes, earlier gains mean that exports in Q1 asa whole grew quite strongly, easily outpacing imports. Net exports likely contributedas much as 3 percentage points to GDP growth. While domestic demand probablyremained …
7th April 2016
We expect the Bank of Canada to keep interest rates at 0.50% next week and maintain a neutral outlook for future policy changes. Despite the strong start to the year, policymakers indicated recently that they believe the economy isn’t out of the woods …
6th April 2016
The Bank of Canada's first-quarter survey on business intentions suggests that the worst might be over for Canada’s struggling economy, but we don’t anticipate any significant improvement this year. Indeed, we suspect that the economy will lose momentum, …
1st April 2016
Despite the recent resurgence in economic growth, we still expect the Bank of Canada to cut interest rates again, albeit not until much later this year. While widening interest rate differentials between Canada and the US would normally push the Canadian …
The 0.6% m/m increase in January GDP, which was double the 0.3% m/m consensus estimate, was a very welcome surprise, particularly as the gain was so broad-based. We are not convinced the stronger tone over the past few months will be sustained, however …
31st March 2016
The Liberal government’s budget plan to lift the economy over the next two years with close to C$12bn in infrastructure funding will be a tall task, one that we would not count on to produce much benefit in terms of additional economic growth. Other …
24th March 2016
The 2016 Federal budget delivered today provides only a modest fiscal stimulus response to the flagging economy. Despite the more dismal GDP growth outlook this year, policymakers weren’t comfortable providing much more fiscal stimulus beyond what was …
22nd March 2016
The recent rally in the Canadian dollar, which has been driven by rising oil prices and downgrades to the outlook for US interest rates, is unlikely to last beyond the middle of this year. Admittedly, we are forecasting a further small rise in oil prices …
18th March 2016
The much stronger than expected increase in manufacturing sales volumes in January is an encouraging start to the year, with the details reflecting stronger external demand and some resilience in domestic demand. Accordingly, the risks around our …
16th March 2016
The housing boom has been a key support to the economy over the past few years, but its end is in sight. While media headlines focus on the continuing booms in Toronto and Vancouver, the fallout in energy-producing regions may result in an even more …
11th March 2016
