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The latest renewed slump in world and domestic crude oil prices is another blow to the outlook for Canada's oil-dependent economy, which has already slipped into a mild recession. With the fallout from the first oil price shock not yet over and signs of a …
20th July 2015
The puzzling weakness in non-energy exports most likely boils down to a lack of competitiveness, even after taking into account the recent depreciation of the Canadian dollar. Unless the value of the loonie falls considerably further, which we doubt, we …
The slightly bigger than expected 0.3% m/m increase in core consumer prices in June doesn't materially reduce the odds of an additional rate cut by the Bank of Canada later this year. Core inflation is still broadly in line with the Bank's latest …
17th July 2015
The continued weakness in manufacturing sales volumes in May is further evidence that the non-energy economy is very unlikely to pull the economy out of its oil-induced slump anytime soon. Accordingly, this supports the case for the Bank of Canada to cut …
15th July 2015
As we expected, the Bank of Canada lowered its key policy rate from 0.75% to 0.50% today, admitting that the economy fell into a mild recession in the first half of the year. We have been warning that the oil downturn would hit the economy harder than the …
The rate of house price inflation rose to 5.1% in June, from 4.6% in May, and the recent rebound in the home sales-to-new listings ratio indicates that it may accelerate to 6.0% soon. The pick-up reflects big gains in Toronto and Vancouver, while most …
14th July 2015
The 2015 investment intentions survey suggests that real private and public investment will fall more sharply than most people realise this year. This is the strongest indication so far that, what might seem like only the mildest of recessions now, is in …
13th July 2015
June's modest 6,400 drop back in employment, which follows the surprisingly strong 58,900 increase in May, should help to quell fears that the economy is tanking. Even so, with the much weaker activity data suggesting that the economy is seemingly in …
10th July 2015
Facing a larger than previously expected fallout from the oil price shock and a still misfiring manufacturing sector, there is a very strong chance that the Bank of Canada will cut rates from 0.75% to 0.50% at next week's policy meeting. An additional cut …
8th July 2015
The unexpected widening of the trade deficit in May is further evidence that, after contracting in the first quarter, the economy probably shrank further in the second quarter. In other words, Canada is in recession. This is why we expect the Bank of …
7th July 2015
The Bank of Canada's latest Business Outlook Survey shows that not only is the fallout from the slump in oil prices still taking a heavy toll on the economy, but the pick-up in non-energy sectors remains underwhelming too. This suggests that, after an …
6th July 2015
With the fallout from the oil price slump still taking its toll on the economy and manufacturing hobbling along, growth prospects look only marginally better now than at the start of the year. For the economy to have any hope of coming close to the Bank …
The unexpected 0.1% m/m decline in April's GDP and slight downward revisions to earlier figures suggest that the economy likely slipped into a recession in the second quarter. With the fallout from the oil price shock far from over, we now expect the Bank …
30th June 2015
Although there is limited scope to reduce interest rates further, the hit from lower oil prices on the economy is taking a heavier toll than widely acknowledged. Without any offset from the non-energy economy, we see no reason why the Bank wouldn't take …
29th June 2015
The increase in the national jobs vacancy rate over the past year suggests that the economy has withstood the oil price shock. Closer examination, however, reveals that this measure lags economic growth by as much as six months. Accordingly, we would be …
22nd June 2015
While May's inflation figures are consistent with the Bank of Canada's forecast, the incoming data suggest that the real economy is still underperforming. If economic growth undershoots the Bank's projections for the rest of the year as we expect, then it …
19th June 2015
The larger than expected decline in April's manufacturing sales suggests that the recent big gains in factory jobs were perhaps a head fake and that the economy began this quarter on a weak footing. Accordingly, the risks to our forecast that …
15th June 2015
The recent rebound in crude oil prices isn't enough to make new oil sands projects profitable again. With the list of cancelled projects growing with each passing day, we expect falling business investment to remain a large drag on the economy over the …
The rate of house price inflation edged up to 4.6% in May, from 4.4%, and the recent rebound in the existing home sales-to-new listings ratio indicates that is where it might remain over the rest of the year. This seemingly tranquil headline, however, …
12th June 2015
After a weather-related pause in the first quarter, household spending is soaring. Faster income growth and a potential drop in the saving rate could see second-quarter consumption grow by more than 5.0% annualised. But we wouldn't bet on a repeat …
9th June 2015
After a dismal turn in the first quarter of the year, the economy should perform somewhat better in the second quarter, but the pace of growth is likely to be unspectacular. With growth of no more than 1.0% annualised expected, this will leave lingering …
8th June 2015
The fact that the economy generated a surprisingly strong 58,900 jobs in May suggests that it is holding up against the oil price shock better than we had expected. This supports the Bank of Canada view that the January rate cut was enough insurance. … …
5th June 2015
The futures market indicates that most investors are now convinced by the Bank of Canada's view that the January interest rate cut will be enough to prevent the economy from being derailed by the collapse in oil prices. In contrast, we think that the …
3rd June 2015
While April's slight pick-up in exports volumes might prompt suggestions that the economy began the second quarter on a stronger footing, the sharp decline in imports indicates that domestic demand only got weaker. Accordingly, this doesn't inspire much …
While headline inflation has fallen sharply due to lower energy prices, the boost to core inflation from the lower Canadian dollar may fade sooner than most realise. Wholesale price inflation, which is most sensitive to swings in the exchange rate, …
29th May 2015
The unexpected 0.6% annualised decline in first-quarter GDP suggests that the Bank of Canada's single 25 basis point rate cut in January may not have been enough insurance against the oil price slump after all. … GDP …
The Bank of Canada's policy statement this morning showed that it remains confident in its optimistic growth outlook and believes that the January rate cut was enough insurance against the oil price shock. We, however, doubt it and anticipate the economy …
27th May 2015
The all-clear siren sounded by the Fraser Institute last week on household debt is misleading. The debt service metric they use only captures the interest cost portion of debt, which completely misses the point in a high debt, low interest rate …
25th May 2015
While headline inflation fell below the Bank of Canada's 1% to 3% target range in April , the ongoing impact of the weaker loonie meant that core inflation rate was still as high as 2.3%. The impact of the currency depreciation will eventually fade, …
22nd May 2015
At next week's policy meeting we expect the Bank of Canada to keep its policy rate at 0.75%. Tighter financial conditions over the past month, however, may have it second guessing whether or not the January rate cut was enough insurance against the oil …
20th May 2015
The recent job losses in the construction sector are likely only a precursor of what's in store for the year ahead. Falling energy investment and cooling housing demand could form the perfect storm, with potential job losses in the sector exceeding those …
18th May 2015
Although the rebound in manufacturing sales in March was stronger than expected, this mainly reflected volatility in transportation, with little evidence of any underlying improvement. Accordingly, this supports our view that the economy stagnated in the …
15th May 2015
The rate of house price inflation edged down to 4.4% in April, from 4.7%, and the existing home sales-to-new listings ratio indicates that some further slowing is likely in the coming months. … Teranet-National Bank House Prices …
13th May 2015
Canada's growing current account deficit probably hit a record high in the first quarter, as the impact of the recent slump in oil prices hit export revenues. The lower Canadian dollar will help to narrow the deficit eventually but, in the near-term, the …
11th May 2015
Although employment declined by a larger than expected 19,700 in April, the details showing strong full-time gains was reassuring, as was the fact that the unemployment rate remained at 6.8%. Nevertheless, the slowing trend in employment hints at …
8th May 2015
The widening of the merchandise trade deficit in March to C$3.0bn, from C$2.2bn, mostly reflected a decline in the terms of trade, whereas export and import volumes rebounded by a similar margin. For the first quarter as a whole, however, external trade …
5th May 2015
In his appearance before the House of Commons Finance Committee last week, Bank of Canada Governor Stephen Poloz reassured policymakers that the economy is showing signs of progress and that the positives will soon outweigh the negatives from the slump in …
4th May 2015
Although February's GDP stagnation was a more mild result than most expected, the details indicated that the fallout from the slump in oil prices hasn't really hit yet, while other parts of the non-energy economy continue to struggle. Accordingly, we …
30th April 2015
The faster pace of payroll job gains might normally be a more trustworthy gauge of labour market trends than the more volatile Labour Force Survey employment figures. The slowdown in real GDP growth that began late last year, however, suggests that, …
27th April 2015
The futures market indicates that most investors are now convinced by the Bank of Canada's view that the January interest rate cut will be enough to prevent the economy from being derailed by the collapse in oil prices. (See Chart.) In contrast, we think …
21st April 2015
Although the Conservative-led government fulfilled its pledge to eliminate the Federal budget deficit, fiscal restraint at this juncture seems unnecessary considering the negative fallout from the slump in oil prices. We expect economic growth to be much …
The Bank of Canada's policy statement last week showed that it isn't willing to fold on its optimistic growth predictions, despite being dealt a bad card in the first quarter. Instead, it decided to double down, by arguing that the oil shock is almost …
20th April 2015
The rise in the official core inflation rate to 2.4%, from 2.1%, was a surprise, but the details showed that this was largely due to pass-through effects from the lower Canadian dollar, rather than any fundamental strengthening in underlying economic …
17th April 2015
The Bank of Canada kept its policy rate at 0.75% this morning, showing confidence that, after stalling in the first quarter, the economy will rebound in the second quarter and never look back. We think this is pure fantasy and expect the oil shock to hit …
15th April 2015
February's larger than expected decline in manufacturing sales, which partly reflects some temporary shutdowns at auto assembly plants and bad weather, is further evidence that first quarter GDP growth was very weak. The balance of risks around our …
Although house price inflation rose to 4.7% in March, from 4.4%, the existing home sales-to-new listings ratio suggests that any further pick-up is likely to be short-lived. … Teranet House Prices …
14th April 2015
The Canadian dollar, which has slumped in response to low oil prices, weakening domestic fundamentals and an easing in monetary policy, probably still has further to fall. An even weaker currency would benefit non-energy exporters, but it will only partly …
13th April 2015
Employment rose by 28,700 in March, more than anyone expected, though not by enough to reduce the jobless rate from 6.8%. The details, however, were less impressive. Even so, the odds of a rate cut by the Bank of Canada next week have diminished somewhat, …
10th April 2015
Canada's economic outlook has deteriorated significantly over the past few months. With energy prices showing no signs of a rebound, oil producers have slashed plans for future investment and employment. A downturn in housing also appears to be underway, …
7th April 2015
The Bank of Canada's latest Business Outlook Survey shows that, while some firms are benefitting from a weaker Canadian dollar, the slump in crude oil prices is having a greater negative impact on the outlook for business investment and hiring. … Oil …
