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February's consensus-matching 0.2% m/m increase in GDP, together with small upward revisions to earlier figures, suggest that first-quarter GDP growth will turn out to be close to 2.0% annualised, higher than the Bank of Canada's estimate of 1.5%. Given …
30th April 2014
February's payroll figures suggest that nominal wages and salaries growth slowed in the first quarter and discouraging job quality trends suggest that wages might not improve much in this quarter either. Meanwhile, faster rising consumer prices will …
29th April 2014
The recent jump in gasoline prices isn’t a conundrum. Several explanatory factors are at play, including seasonal effects. But for the most part, rising gasoline prices reflect higher refinery crude input costs and the lower Canadian dollar. Unfortunately …
28th April 2014
Canada’s economic underperformance will continue as competitiveness challenges restrain exports and the slowdown in housing intensifies. We expect GDP to increase by 2.0% in 2014, before slowing to only 1.5% in 2015. Under these circumstances, the Bank of …
24th April 2014
The trivial rise in retail sales volumes in February suggests that spending was probably still being held back by the unusually severe winter weather. Nonetheless, after accounting for the better gains in both wholesale and manufacturing trade, we …
23rd April 2014
As the effects of the severe winter weather subside in the second quarter, the resulting bounce back in GDP growth could be misinterpreted as a sign of improving fundamentals rather than a short-lived burst of pent up demand. While we agree that there is …
21st April 2014
While headline inflation rebounded to 1.5% in March, from 1.1%, the uptick was due to higher energy prices and base year effects. In contrast, core inflation climbed only slightly to 1.3% last month, from 1.2%, suggesting that fierce retail competition is …
17th April 2014
The Bank of Canada retained its neutral rate bias in its latest policy statement and emphasised that, despite the lower Canadian dollar, core inflation will still take about two years to return to target. With the Bank clearly still concerned about the …
16th April 2014
The steady rise in Canadian oil prices over the past few months has, in the case of light sweet crude, left them back on par with international benchmarks. Canada's energy producers have benefitted from the reconfiguration of pipelines at the US Cushing …
15th April 2014
Despite the rebound in manufacturing sales volumes in February, the significant downward revisions to sales in the two preceding months confirm that bad weather dampened economic growth in the first quarter. We estimate that first-quarter GDP growth was …
The decline in the Teranet measure of house price inflation to 4.6% in March, from 5.0%, reflects the earlier drop back in existing home sales. We expect sales to continue falling, eventually prompting an outright decline in prices. … Teranet-National …
14th April 2014
Canada's economic performance over the second half of last year was slightly stronger than the Bank of Canada had assumed at the start of the year, but there have been few signs of the rotation in demand towards exports and business investment that it has …
We anticipate that the Bank of Canada will retain its neutral bias on rates in next week's policy statement, although some dovish tweaks might surprise markets. Economic growth remains unbalanced, thwarted by weak exports and housing imbalances. …
9th April 2014
The recent slowdown in housing starts is just the beginning of a long-term correction that will dampen economic growth this year and next. If, as we expect, new home sales soften further, in response to tighter credit conditions and softening investor …
8th April 2014
The modest improvement evident in the Bank of Canada's spring Business Outlook Survey is an encouraging sign, but doubts remain about the near-term outlook for exports and softening domestic demand. Accordingly, we doubt that this slight increase in …
7th April 2014
The recent acceleration in wage inflation is an encouraging sign, especially considering the excess slack in labour markets and still uncertain economic outlook. For these and other reasons, however, there is limited upside potential to wage growth this …
Employment increased by a robust 42,900 in March, driving the unemployment rate down to a four-month low of 6.9%, from 7.0%. Unfortunately, the bulk of the net jobs created last month were apparently part-time positions taken up by youths. … Labour Force …
4th April 2014
February's merchandise trade report, which revealed only a partial rebound in export volumes, can be partly blamed on bad weather. Nevertheless it still seems that Canada's economy isn't benefitting fully from the steadily improving US economy. … …
3rd April 2014
The stronger than expected 0.5% m/m rebound in January's GDP, which fully reversed December's weather-related contraction, suggests that bad weather had a smaller effect on first-quarter activity than previously thought. Accordingly, the risks to our GDP …
31st March 2014
The decision by Canada's large banks to cut fixed mortgage rates ahead of the typically busy Spring home buying season won't boost sagging home sales. With housing so unaffordable, mortgage rates already incredibly low and mortgage lending rules tighter, …
In his speech last week, Bank of Canada Governor Stephen Poloz argued that the legacy of the financial crisis and demographic changes can explain Canada's recent lacklustre economic performance. More importantly, the latter also implies that future trend …
24th March 2014
The decline in annual headline inflation to 1.1% in February, from 1.5%, won't concern the Bank of Canada as it mainly reflects base-year effects in transportation and clothing. Meanwhile, the strong rebound in retail sales volumes in January, following …
21st March 2014
Pauline Marois, leader of the separatist Parti Quebecois (PQ), has suggested that an independent Quebec could hold a seat on the governing council of the Bank of Canada and retain the Canadian dollar as its currency. While it would lead to increased …
19th March 2014
The partial rebound in manufacturing sales volumes in January can be partly blamed on the bad weather, which continues to constrain activity. Nevertheless, the persistent weakness in unfilled orders suggests that manufacturing is still struggling. We …
18th March 2014
The fall in manufacturing capacity utilisation over the past year casts further doubt over the Bank of Canada's expectation that the external sector can take over from households in driving economic growth. The reasons for manufacturing's troubles aren't …
17th March 2014
January's discouraging external trade figures suggest that the economy began the year on a weak footing. Unfortunately, exporters are likely to struggle throughout the year. Although the Canadian dollar has fallen significantly from levels a few months …
12th March 2014
The further acceleration in house price inflation to 5.0% in February, from 4.5% in the previous month, mainly reflects tighter supply and demand conditions. The drop in existing home sales since then, however, suggests that house price inflation will …
The recent rise in inflation prompted the Bank of Canada to take a slightly more hawkish stance in its policy statement last week. At 1.5% in January, inflation is still well below the mid-point of the Bank's 1% to 3% target range. But the dollar's …
10th March 2014
The 7,000 decline in employment in February specifically is not a major concern since the unusually severe winter may have played a role. Nevertheless, the broader picture is that employment has been largely stagnant since last summer and the only reason …
7th March 2014
Although the Bank of Canada left its policy rate unchanged at 1.0% today and maintained its neutral bias, we suspect that the emphasis on the recent rebound in inflation in the accompanying statement will be interpreted by the markets as a more hawkish …
5th March 2014
Although inflation has been uncomfortably low for some time now, the risk of a slide into deflation is still fairly modest. Long-term inflation expectations remain well anchored and the Canadian dollar's recent slump will soon begin to have a more …
3rd March 2014
The Bank of Canada admitted in January's monetary policy statement that "there have been few signs of the anticipated rebalancing towards exports and business investment." Not much has changed since then, suggesting the Bank will keep that language when …
At first glance, the 2.9% annualised gain in fourth-quarter GDP suggests that the economy is on the right track. Unfortunately, growth was once again dependent on spending by heavily-indebted households and inventory building, with business investment …
28th February 2014
The Bank of Canada's key policy rate has been on hold at 1.0% for more than three years now. With inflation still uncomfortably low and economic growth still overly-dependent on debt-fuelled housing activity, there is little prospect of any change in …
26th February 2014
The 2014 annual investment intentions survey, which points to another very modest gain in business investment this year, will come as a blow to the Bank of Canada. The Bank is still hoping for a rebalancing of economic growth, with bigger gains in …
Canada's economic performance over the final quarter of last year was probably the best in more than two years. The breakdown, however, is likely to show that the economy is still heavily dependent on household-related spending and investment. However, we …
24th February 2014
The pick-up in core inflation to 1.4% in January, from 1.3%, reflects both base-year effects and possibly some early impact from the weaker Canadian dollar. The latter is something that we anticipate will cause inflation to nudge higher in the coming …
21st February 2014
Although housing starts have declined over the past two years, the current six-month annualised trend of 191,456 units is arguably still above demographic requirements. With weakening home sales and worsening oversupply, there is nothing to prevent …
17th February 2014
The discouraging decline in December's manufacturing sales volumes and downward revision to the previous month dampens our view that the improving outlook overseas may finally be filtering through to Canada. Still, given the strength in other sectors, we …
14th February 2014
January's pick-up in house price inflation isn't that surprising when you consider last year's home buying rush that was triggered by fears of rising mortgage rates. Now that home sales are dropping back just as quickly as they rebounded, however, it …
12th February 2014
It seems almost certain now that the Federal government will meet its timetable for eliminating the budget deficit before fiscal year 2015-16, which will give it the wiggle room it needed to deliver on its promised tax cuts ahead of next year's federal …
11th February 2014
The breakdown of Canada's sluggish export performance reveals that some of the weakness in the second half of last year should prove temporary. The persistent weakness in some industries such as autos and electronics, however, is more troubling. Although …
10th February 2014
The modest rebound in employment in January, which was not enough to reverse completely the slump last December, suggests that bad weather isn't the only factor depressing labour market conditions. With an export recovery still proving elusive and housing …
7th February 2014
The surprisingly large increase in December's trade deficit provides further evidence supporting our view that Canada's economy isn't benefitting fully from the steadily improving US economy. … International Merchandise Trade …
6th February 2014
The recent slide in the Canadian dollar doesn't greatly improve Canada's economic prospects. The sharp decline looks overdone in our mind and we wouldn't be surprised to see a rebound, at least a temporary one. Even at its current level, it is still too …
5th February 2014
Although economic growth improved over the second half of last year, averaging an estimated 3.0% annualised, there is still no sign of a much-needed rebalancing towards exports and business investment. The breakdown reveals that the unbalanced nature of …
The recent turmoil in emerging markets is a knock to Canada's trade and commodity dependent economy that the Bank of Canada can't ignore. Although it has only had a modest negative impact on Canada's financial markets so far, its too early to know the …
3rd February 2014
November's steady GDP growth of 0.2% m/m supports our view that the economy grew by an annualised 3.0% in the final quarter of last year. … GDP by Industry …
31st January 2014
The recent non-farm payroll figures suggest that wages and salaries growth continued to accelerate in the fourth quarter, which should have helped support stronger consumption growth. … Stronger wages and salaries growth unlikely to …
The Canadian dollar's sharp decline over the past few weeks seems a tad overdone and we wouldn't be surprised if it enjoyed a modest rebound over the coming month or so. As the incoming economic data confirm that Canada's economy grew just as strongly in …
27th January 2014
