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While the Credit Suisse rescue might draw a line under that particular institution’s problems, it is clear that confidence in the financial sector overall is still extremely fragile. So regardless of whether more financial institutions run into trouble, …
20th March 2023
The fixed payment structure of most variable rate mortgages has cushioned households from the impact of high interest rates so far, with the data this week confirming that debt service costs remained low last quarter. But that only delays the pain in …
17th March 2023
Tentative signs of stabilisation, but risks abound House prices fell at a slower pace in February and the sharp improvement in the sales-to-new listing ratio offers some hope that they will soon stabilise. While the turmoil in the global banking sector …
15th March 2023
The Canadian banking sector is heavily concentrated, reducing the risk that deposit runs at small lenders might trigger a broader crisis of confidence for the entire sector. As things stand, the chance of the Bank of Canada soon cutting interest rates – …
14th March 2023
Strong start to the year but risks on the horizon The manufacturing sector made a stellar start to 2023, but the surveys suggest growth will soon slow and the banking sector problems in the US could weigh on manufacturing demand over the rest of the year. …
Despite the renewed hawkishness of central bankers elsewhere, the speech that followed the Bank of Canada’s policy announcement this week suggests that the bar to resume rate hikes remains high. Bank still comfortable with its “conditional pause” The …
10th March 2023
Hours worked rise strongly despite employment slowdown Employment growth slowed sharply in February but the rise in hours worked suggests that the economy performed well last month. With the low unemployment rate putting upward pressure on wage growth, …
The Bank of Canada kept its policy rate unchanged at 4.5% today as expected but, with one eye on the strength of the recent US data and the Fed’s hawkish reaction to that, it sounded less confident that it could maintain the conditional pause in rates …
8th March 2023
Policy unchanged, but Bank leaves the door open to future hikes There were no surprises from the Bank of Canada today as it kept the policy rate unchanged at 4.5%, as it previously hinted it would, and reiterated that it is still prepared to resume …
Surge in exports supported GDP growth at start of 2023 The strong gains in exports and imports in January suggest that easing supply shortages are offsetting the negative impact of higher interest rates on both external and domestic demand. That presents …
Surge in exports supported GDP growth at start of 2023 The broad-based jump in exports at the start of the year suggests that net trade should boost GDP growth this quarter. Nonetheless, with the surveys of export orders still very weak, that boost seems …
The latest data give the Bank of Canada plenty to think about ahead of its policy announcement next week. The data appear to lend support to the Bank’s view that a soft landing is still achievable, with the stagnation in fourth-quarter GDP followed by a …
3rd March 2023
Encouraging signs in January CPI and economy has slowed sooner than expected But labour market still tight and wage pressures too strong Risk of higher interest rates elsewhere also keeps pressure on the Bank The fall in CPI inflation in January and …
1st March 2023
Economy stagnates, supporting the Bank’s move to the sidelines The stagnation in fourth-quarter GDP, together with the downward revision to third-quarter GDP growth, leaves the economy in worse shape than the Bank of Canada expected. That is another …
28th February 2023
The larger-than-expected fall in CPI inflation in January was partly due to one-off effects, but still reduces the chance that the Bank of Canada will be forced to resume raising interest rates. Nevertheless, the renewed rises in the job vacancy rate …
24th February 2023
The January CPI data provided mixed signals about developments in underlying inflation. The CPI excluding food and energy and the CPI excluding the eight most volatile components each rose by just 0.1% m/m, which were the lowest gains since early 2021. …
22nd February 2023
The war in Ukraine. Ageing populations. Rising temperatures. Investors are having to grapple with a formidable range of uncertainties around the long-term outlook for the global economy and markets. Their challenge is compounded by the fracturing of the …
Core prices rise at slowest pace in two years The much smaller rise in core prices in January suggests that headline inflation will fall faster than the Bank of Canada expects, reinforcing our view that the Bank is unlikely to resume raising interest …
21st February 2023
Core prices rise at slowest pace since early 2021 Core prices only inched up in January, which contributed to a larger-than-expected fall in headline inflation. That reinforces our view that the Bank of Canada is unlikely to follow the Federal Reserve in …
Governor Tiff Macklem reiterated this week that the Bank of Canada wants time to assess the impact of high interest rates, suggesting it will not respond to the strength of employment by immediately resuming interest rate hikes. The weakness of home …
17th February 2023
Unseasonably warm weather provides little support The unseasonably warm start to 2023 provided little support to the housing market or construction, with sales and prices falling further in January while housing starts slumped to a 28-month low. As prices …
15th February 2023
Sales volumes fall again despite resurgent motor vehicle sector Another rise in motor vehicle manufacturing sales failed to offset weakness elsewhere in December, with overall sales volumes edging down. The rebound in the S&P Manufacturing PMI and …
The surge in employment in January highlights that some sectors are still recovering strongly and raises the prospect that the economy could avoid recession, although we still judge that a modest one is more likely than not. As the employment gains have …
14th February 2023
The surge in employment and rise in hours worked in January suggest that economic activity continued to expand at the start of 2023 and present clear upside risks to our forecasts for GDP growth. Nevertheless, we disagree with the market-implied view …
10th February 2023
Surge in employment eases recession fears The surge in employment and rise in hours worked in January suggest that GDP growth will be stronger than we anticipated this quarter. However, the decline in wage growth means that unexpected strength is unlikely …
Labour market strength eases recession fears The surge in employment and strong rise in hours worked in January suggest that GDP growth will be stronger than we anticipated this quarter. However, the decline in wage growth means that unexpected strength …
Overall services price growth has already slowed but, for the Bank of Canada to loosen policy, we will need to see far more convincing signs of lower inflation in the most labour-intensive service sectors. The Bank has stressed that it is following …
9th February 2023
Bank balancing risks of sticky services inflation and housing market The Summary of Deliberations reveals that the Bank of Canada is still concerned about the risk that inflation will not decline all the way back to the 2% target, but that it ultimately …
8th February 2023
Rebound in auto exports offsets decline in commodity export prices A surge in motor vehicle exports drove export volumes higher at the end of 2022, even as lower commodity prices weighed on export values. While there is scope for motor vehicle exports …
7th February 2023
Rebound in autos exports offsets decline in commodity export prices A surge in motor vehicle exports drove overall export volumes higher at the end of 2022, even as lower commodity prices weighed on export values. As the export order surveys are still …
There were more mixed signals this week on how the economy is coping with higher interest rates. The GDP data suggest fourth-quarter growth was stronger than initially expected and the manufacturing PMI unexpectedly rose back into expansionary territory …
3rd February 2023
Canada has built fewer new homes relative to population growth than other advanced economies, but this alone cannot explain the much larger rise in house prices during the last decade. Looser credit conditions have played the dominant role by far, with …
1st February 2023
Monthly data point to healthy fourth-quarter growth The monthly data suggest GDP growth slowed to 1.6% annualised in the fourth quarter, which would be better than initially expected considering the surge in interest rates. Nonetheless, with some of the …
31st January 2023
Monthly data point to healthy fourth-quarter GDP growth The monthly data suggest that GDP expanded by 1.6% annualised in the fourth quarter. That would mark a sharp slowdown from the gain of 2.9% in the third quarter, but would still be much better than …
Governor Tiff Macklem stressed on Wednesday that the pause in the Bank of Canada’s tightening cycle is conditional on looser conditions in the labour market and a fall in inflation expectations. The CFIB Business Barometer showed evidence of both a day …
27th January 2023
The Bank of Canada accompanied its smaller 25 bp hike with new guidance that it intends to hold the policy rate at the current 4.5% while it assesses the impact of the cumulative interest rate increases so far. While the Bank did not rule out future …
25th January 2023
Bank hints that smaller 25 bp hike likely to be the last The Bank of Canada accompanied its smaller 25 bp hike with new guidance that it intends to hold the policy rate at the current 4.5% while it assesses the impact of the cumulative interest rate …
The sharp fall in hiring intentions in the Bank of Canada’s Business Outlook Survey suggests that the 104,000 surge in employment in December is not a sign of things to come. The survey points to a slowdown in average monthly employment growth to just …
23rd January 2023
The CPI-trim and CPI-median measures of core inflation will be revised up next month but that does not change our view that they will fall sharply over the first half of this year. We think the 25 bp hike from the Bank of Canada next week will mark the …
20th January 2023
Retail sales appear to have ended 2022 with a bang Retail sales edged down in November but the preliminary estimate of a 0.5% m/m rise in December, despite the double-digit fall in gasoline prices, implies that sales volumes rose sharply at the end of …
Economic growth slowing and inflation falling But labour market still tight and inflation expectations too high Bank to drop down to 25 bp hike, but likely to add hawkish guidance The Bank of Canada is set to raise interest rates by a smaller 25 bp …
18th January 2023
House prices fall further despite lower new listings The large fall in new listings in December failed to prevent another sizeable drop in house prices, but the improvement in the sales-to-new listing ratio offers some hope that the downward pressure on …
17th January 2023
Encouraging signs despite elevated core inflation Although the annual rates of core inflation remain elevated, the three-month annualised rates of CPI-trim and CPI-median dropped back to 2.5% in December. Elevated inflation expectations mean that the …
Some encouraging signs despite elevated core inflation Unfavourable base effects mean that the small falls in CPI-trim and CPI-median inflation in December are better than they look. And with prices falling on the month for the first time since July 2020, …
Wage and price inflation expectations still too strong for comfort The Bank of Canada’s latest quarterly surveys leave no doubt that higher interest rates are weighing on demand, but still don’t show a convincing moderation in wage and inflation …
16th January 2023
Surge in motor vehicle sales fails to offset weakness elsewhere The easing of supply shortages provided a big boost to motor vehicle shipments in November, but this failed to offset falls elsewhere. While there is scope for transportation equipment …
The December CPI data and the Bank of Canada’s quarterly business and consumer surveys, released next week, could have a big bearing on the policy outlook. For the Bank to pause after one final 25 bp hike this month, as we assume, it will need to see …
13th January 2023
The activity and labour market data imply the economy carried more momentum into 2023 than we expected, but the weakness of temporary employment suggests cracks are showing beneath the surface. The revised preliminary estimate that GDP edged up by 0.1% …
10th January 2023
