Filtered by Subscriptions: Canada Economics Use setting Canada Economics
Budget 2024 made a bit of a splash thanks to the unexpected changes to capital gains taxes, but we do not think the new net spending measures were large enough to change the outlook for GDP growth or interest rates this year. The encouraging March CPI …
19th April 2024
Finance Minister Chrystia Freeland’s pledge to create the conditions needed for lower interest rates means the government is unlikely to announce much new near-term spending in Budget 2024 next week. Providing that core inflation pressures remain muted, …
12th April 2024
The insolvency data released this week show the toll that high interest rates are putting on consumers and businesses. That is unlikely to be enough to persuade the Bank of Canada to cut interest rates next week but, with the cracks in the labour market …
5th April 2024
The economy made a strong start to 2024, but that was partly due to the end of strike disruption and the record warm winter. We expect GDP growth to slow sharply next quarter, persuading the Bank of Canada to start its loosening cycle in June. GDP surges …
28th March 2024
The surprise fall in February leaves CPI inflation on track to average 2.8% this quarter, well below the Bank of Canada’s forecast of 3.2%. As the decline in inflation pressures was broad-based, there is a growing likelihood that the Bank of Canada will …
22nd March 2024
Households are offsetting the impact of high interest rates by paying down less of their debt. While that has helped the economy to avoid recession, it also suggests there will be less of a boost from interest rate cuts than in the past, because …
15th March 2024
Governor Tiff Macklem dropped a hint this week that the Bank of Canada may be ready to cut rates by June. There was little in the data to dissuade the Bank, with unemployment rising and bankruptcies surging, while a productivity rebound pulled down unit …
8th March 2024
The return to growth in the fourth quarter means it is probably safe to say that the economy has avoided recession, but that is mainly due to rapid immigration. Per capita GDP fell for the fifth quarter running and is now barely higher than in 2016. Ahead …
1st March 2024
The encouraging January CPI data mean that the Bank of Canada’s April policy meeting is back in play for a potential interest rate cut, although it still seems more likely that the Bank will wait until June – unless the economic and labour market data …
23rd February 2024
Signs of healthy growth going into the first quarter support our view that the Bank of Canada will probably wait until June to pivot to rate cuts. Signs of positive activity in the first quarter The latest January data has brought signs that growth could …
16th February 2024
The strength of the labour market in January is another reason to think that the Bank of Canada can wait a little longer before it starts to cut interest rates. Bank’s latest communications give little away Governor Tiff Macklem gave little away in his …
9th February 2024
The upside surprise to fourth-quarter GDP should, somewhat counterintuitively, make the Bank of Canada more confident that inflation is heading back to 2% because it implies that productivity has rebounded. Nonetheless, with the Federal Reserve pushing …
2nd February 2024
The outlook for monetary policy all depends on whether the Bank of Canada is willing to act based on where it thinks shelter inflation is heading, rather than its current rate. The Bank’s communications suggest it is starting to move in that direction, …
26th January 2024
There was little for the Bank of Canada to be encouraged by this week, with evidence of a further deterioration in the economy yet little sign of a fall in inflation expectations or downward pressure on core inflation. That puts the Bank in a tricky …
19th January 2024
The latest Trans Mountain regulatory hearing will determine whether the pipeline expansion is once again delayed. That would weigh further on the outlook for exports, with external demand already very weak. Another year, another year’s delay? Admittedly, …
12th January 2024
Conditions in the housing market seem to be improving, with the local real estate board data pointing to a big improvement in the home sales-to-new listing ratio in December. While the unseasonably warm weather may have played a role and house prices …
5th January 2024
Data this week showed that the population jumped by 430,000 in the third quarter alone, almost as much as the official full-year permanent resident target of 465,000. Nonetheless, the November CPI data showed a much-needed slowdown in rent inflation, …
22nd December 2023
Household net worth fell in the third quarter, although the recent resurgence in bond and equity prices means that should soon be reversed. It is too soon to sound the all-clear for households’ finances, however, given that the debt service ratio is set …
15th December 2023
The Bank of Canada this week reiterated that strong immigration is putting upward pressure on inflation because housing supply is failing to keep up. Yet the Bank surely can’t be oblivious to the negative impact of high interest rates on construction. …
8th December 2023
The revisions to the national accounts leave the post-pandemic recovery looking stronger than we thought. But that is partly due to intense inventory building, which leaves the economy vulnerable to a period of destocking now that demand is weakening. …
1st December 2023
It would be a stretch to say the government showed fiscal restraint in the Fall Economic Statement , but the announcement of only a few billion dollars in extra spending measures means that Finance Minister Chrystia Freeland did not pour much more fuel on …
24th November 2023
For the first time since the pandemic, the government will find itself with less fiscal room than expected when it provides an update of its plans next week. Accordingly, we doubt that the Fall Economic Statement will contain any major giveaways. Gloomy …
17th November 2023
The Bank of Canada’s latest Summary of Deliberations was more hawkish than most probably expected, with some members of the Governing Council still seemingly arguing for further rate hikes. That said, the weak GDP data released since the Bank’s last …
10th November 2023
Employment edged up in October but the broad-based weakness of GDP growth, the depressed business surveys and the rapidly weakening housing market all suggest that the economy is in the early stages of recession. GDP probably contracted again last quarter …
3rd November 2023
The Bank of Canada’s insistence that inflationary risks have increased seems at odds with its new forecasts, which show a large degree of economic slack opening up next year. Our view that the Bank is still overestimating the near-term outlook for both …
27th October 2023
The renewed weakness in the housing market and likelihood that mortgage interest cost inflation will soon ease are reasons to expect core inflation to trend lower in the coming months. Next week, the Bank of Canada’s new forecasts may show that it thinks …
20th October 2023
The fall in house prices in September shows just how quickly conditions in the housing market have shifted and the plunge in the sales-to-new listing ratio points to more weakness to come. That is another reason to expect the Bank of Canada to cut …
13th October 2023
The further rise in home listings in September and likelihood that mortgage rates will increase amid the global bond market sell-off suggests that house prices will soon fall again. While employment rose strongly in September, the fall in hours worked …
6th October 2023
The recent acceleration in immigration may not be enough to keep the economy afloat, with the latest data and surveys pointing to an increased chance that GDP will contract over the rest of the year. 40,097,761 and counting Stats Can confirmed this week …
29th September 2023
Given clearer signs of economic weakness in recent weeks, we think the surprise increase in underlying inflation pressures in August means the Bank of Canada is more likely to keep interest rates at their current level for longer than to raise rates …
25th September 2023
A recent poll suggests that Canadians are growing sceptical of the government's high immigration targets. Whether policy shifts or not, it is inevitable that net immigration will eventually slow from record rates, but there is no sign of that yet. Opinion …
15th September 2023
In his speech this week, Governor Tiff Macklem sounded much more confident that the Bank will be able to meet its 2% inflation target. The latest labour market and local housing data suggest that may still be possible without a recession. Policy rate has …
8th September 2023
Bank to pause amid rising recession risks The surprise second-quarter contraction in GDP was partly due to the wildfires but, even without that damage, growth would have been very weak. With the August CFIB Business Barometer showing further concerning …
1st September 2023
The worst Canadian wildfires on record appear to be behind much of the recent weakness in GDP and, with more areas now under evacuation orders, the data are likely to remain weak in the coming months. Broader negative impact than 2016 wildfires Worst “on …
25th August 2023
While the renewed rise in headline inflation in July seems concerning, a closer look shows disinflationary pressures are still building in key areas. Together with easing demand, that should give the Bank of Canada enough reason to leave rates on hold in …
18th August 2023
Although export volumes fell for the second month running in June, the strength of imports suggests that domestic demand is holding up and the Bank of Canada will be pleased to see that import prices continue to fall. Export volumes weak, but imports …
11th August 2023
More reasons for the Bank to remain on hold The further rise in the unemployment rate in July and signs that the housing market is cooling again are both reasons to doubt that the Bank of Canada will raise interest rates further. Employment weakened in …
4th August 2023
The Bank of Canada’s Summary of Deliberations highlighted the Bank’s concern that inflation could become stuck above the 2% target. Although headline inflation faces a bumpy downward path over the coming months, we think a faster easing in core inflation …
28th July 2023
Headline inflation fell to 2.8% in June and, excluding mortgage interest costs, was in line with the 2.0% target. While the Bank’s preferred core measures are still higher, the weakness of retail sales in May and June suggests demand is easing and is …
21st July 2023
The Bank of Canada struck a hawkish tone at its meeting this week, emphasising persistent excess demand and sticky price inflation. Nonetheless, with the upgrades to the Bank’s GDP and inflation forecasts putting them above our own, we think the hike this …
14th July 2023
The data this week showed big improvements in supply in both the labour and housing markets, which should give the Bank of Canada confidence that CPI inflation will continue to decline. We still expect the Bank to raise interest rates by 25bp next week to …
7th July 2023
There was plenty for the Bank of Canada to digest this week, with the data showing that core inflation fell in May even as GDP growth picked up strongly again. The resilience of economic activity makes us think that the Bank is still leaning toward …
30th June 2023
Recent data fan Bank of Canada's fears The latest Summary of Deliberations gave no hint about whether the Bank of Canada will raise interest rates again at the July meeting but, with little progress yet on any of the key factors that the Bank is watching, …
23rd June 2023
Households feeling the pinch from higher rates Heavily indebted households are still being sheltered from the full impact of the surge in interest rates over the past 18 months, but their finances look ever-more perilous. The household debt to …
16th June 2023
The fall in employment in May suggests the Bank might not need to follow its 25bp hike this week with another in July. But with employment among prime-age people continuing to rise strongly and house prices surging last month, we still suspect the Bank is …
9th June 2023
The upside surprise to first-quarter GDP growth means there is a rising probability that the Bank of Canada will raise interest rates again. While the commonly held view seems to be that the Bank will wait until July, the passing of the US debt ceiling …
2nd June 2023
The decline in the job vacancy rate to a 22-month low in March eases some of the pressure on the Bank of Canada but, with the CFIB Business Barometer showing a renewed rise in firms’ selling price expectations this month, we continue to judge that …
26th May 2023
The Bank of Canada’s latest Financial System Review reiterated the risks to households from higher interest rates, but concluded that most are coping well. Following the rapid turnaround in the housing market and upside surprise to CPI inflation in April, …
19th May 2023
The Bank of Canada’s first-quarter Senior Loan Officer Survey (SLOS) showed a sharp tightening of mortgage lending standards, but we already know that has not been enough to prevent a resurgence in the housing market. While bank lending standards for …
12th May 2023
Following the renewed concerns about regional US banks this week, markets are again pricing in interest rate cuts from the Bank of Canada later this year. From a domestic perspective, however, the strength of the local real estate board data in April and …
5th May 2023