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The slump in the participation rate this year at least partly reflects the cyclical weakness of hiring, which means that the labour market is weaker than the unemployment rate alone might suggest. The silver lining is that an eventual rebound in …
20th November 2024
New immigration targets threaten nascent recovery Lower mortgage rates appear to be finally sparking a recovery in the housing market, with home sales soaring to a two-and-a-half-year high last month and the sales-to-new listing ratio now pointing to …
19th November 2024
Upside surprise not only due to property tax update With headline inflation still at target and given the Bank’s recent emphasis on the need to ensure that GDP growth and the labour market pick up again, the upside surprise to core inflation in October …
The US election outcome means that Canada and the US will not be trading friendship bracelets anytime soon and leaves the risks to inflation more finely balanced, but we still think that growth concerns will prompt the Bank of C anada to cut the policy …
15th November 2024
Manufacturing sales weak, but tentative signs of a recovery Despite the 0.4% m/m decline in manufacturing sales volumes in September, the data still appear consistent with the flash estimate that GDP rose by 0.3% that month. Although manufacturing has …
Clearer window into policymakers’ minds While the Summary of Deliberations from the Bank of Canada’s October meeting didn’t give much away about the size and pace of further interest rate cuts, we did learn more about policymakers’ aims. The Bank has …
8th November 2024
Muted job gain even worse that it seems The muted rise in employment in October was even weaker than it seems, as, like in September, it was propped up by strong gains in youth employment. While the unchanged unemployment rate will reassure the Bank that …
Earlier interest rate cuts are yet to have much effect on the Canadian economy, which remains trapped in a period of below-potential growth. Making matters worse, any boost to the economy from lower borrowing costs next year will be countered by a decline …
5th November 2024
Goods trade balance improves, but for the wrong reasons The improvement in the goods trade position in September was for all the wrong reasons, with a fall in imports outpacing a decline in exports. While this suggests that net trade provided a small …
While there were some positives to take from this week’s GDP data release, it still points to an economy stuck in a period of below potential growth. This reinforces our view that the Bank of Canada will cut by 50bp again in December. Third-quarter GDP …
1st November 2024
The government’s plan to trim the population will hit potential GDP growth and, given the headwinds for residential investment, reduce the chance of GDP reaching that lower potential level. Rents on new leases are set to fall, which presents downside …
31st October 2024
Heading for a weak third-quarter The unchanged level of GDP in August and downgrade to July puts third-quarter growth on track to sharply undershoot the Bank of Canada’s estimate of 1.5%. That provides some support to our view that the Bank will cut …
With the Conservatives currently on track to win a clear majority at the next federal election, which is due by October 2025 but could come much earlier, there is a high chance that the carbon tax will soon be scrapped. We do not think this would alter …
28th October 2024
Bank steps up the pace of loosening The Bank’s shift to a larger interest rate cut this week, which took the policy rate down to 3.75% (see here ), created some confusion among commentators. Some wondered why the Bank felt the need to act more …
25th October 2024
This page has been updated with additional analysis since first publication. Upside risks to the Bank’s consumption forecasts growing The increase in retail sales in August and flash estimate for another rise in September poses an upside risk to the Bank …
The government’s new immigration plan implies that the population will decline by 0.2% in both 2025 and 2026, a huge shift from population growth of almost 3% over the past two years. That means GDP growth is likely to remain subdued in the next couple of …
24th October 2024
We discussed the Bank’s policy decision in a Drop-In. You can view the recording here . The weak economic backdrop means we still see a strong case for the Bank of Canada to follow its larger 50bp cut today, which took the policy rate to 3.75%, with …
23rd October 2024
50bp cut likely to be followed by another The weak economic backdrop means there is a strong case for the Bank of Canada to follow its larger 50bp cut today, which took the policy rate to 3.75%, with another 50bp move at the next meeting in December. Our …
All systems go on 50bp A string of soft data releases this week should give the Bank of Canada the necessary confidence to step up the pace of monetary easing at its meeting next week. September’s CPI report , on Tuesday, showed headline inflation at 1.6% …
18th October 2024
GDP growth and inflation have surprised to the downside of Bank’s forecasts That should persuade the Bank to enact a larger 50bp cut next week We expect another 50bp cut in December to take the policy rate to 3.25% by year-end The Bank of Canada has said …
16th October 2024
Supply continues to outpace demand Lower mortgage rates have provided a small boost to demand but, with new listings outpacing sales again in September, the sales-to-new listing ratio suggests that house prices will soon fall. Meanwhile, developers seem …
Manufacturers still struggling The 0.8% m/m decline in manufacturing sales volumes in August looks consistent with the flash estimate that GDP was unchanged that month, leaving the economy on track for a weaker third quarter. Although the S&P Global …
Downside surprise makes a 50bp cut next week look likely The downside surprise to headline inflation in September and muted monthly gains in the CPI-trim and CPI-median core measures support our view that the Bank of Canada will choose a more aggressive …
15th October 2024
The stronger labour market data makes the Bank of Canada’s decision in October a close call but, with upside inflation risks fading, and demand still very weak, we think the Bank will want to bring interest rates to a more neutral stance relatively …
11th October 2024
The key activity and labour market indicators in the Bank of Canada’s surveys did not deteriorate last quarter, but they remain consistent with weak GDP growth, rather than the pick-up the Bank is looking for. The weak results mean that, despite the …
Stronger employment gain unlikely to be repeated The stronger rise in employment and fall in the unemployment rate in September were largely due to a seasonal quirk, as the weak summer jobs market meant that fewer young workers left positions than usual …
With the inflation battle seemingly won, the Bank of Canada has indicated that it is prepared to cut interest rates more quickly if warranted, with that decision hinging on developments in business hiring, investment and consumption. While the focus on …
8th October 2024
Boost from net trade to be offset by weaker domestic demand Despite the trade deficit widening in August, developments earlier in the quarter means that net trade looks set to support GDP growth in the third quarter. With most of that positive …
Home sales struggling to keep up with listings The local real estate board data released this week showed that the housing market is still struggling despite the recent fall in mortgage rates. It was positive to see sales in Toronto grow by a stronger …
4th October 2024
The economy is stuck in a period of below-potential GDP growth, with previous interest rate hikes weighing on consumer spending and investment. This will keep downward pressure on core inflation, which we expect will reach the Bank of Canada’s 2% target …
30th September 2024
Worrying signs in the CFIB Business Barometer Although the CFIB Business Barometer covers only small firms, in recent years the survey indicators have provided a fairly accurate steer to economic conditions. The headline index fell to 55.0 in September …
27th September 2024
Stronger monthly GDP growth will be short lived Although the rise in GDP in July was stronger than expected, the preliminary estimate of unchanged GDP in August suggests that the momentum was short lived and puts third-quarter growth on track to surprise …
Overview – With the inflation battle all but won, weak GDP growth will force the Bank of Canada into more aggressive action, with a couple of 50bp interest rate cuts to end this year. We expect the Bank to adopt a more measured pace of loosening in 2025, …
25th September 2024
Bank to step up the pace of easing The Summary of Deliberations from September’s policy meeting, published on Wednesday, revealed that the Bank of Canada is placing increasing emphasis on the downside risks to inflation and activity. Some on the Governing …
20th September 2024
Stronger third quarter consumption The rebound in retail sales volumes in July will be welcome news to the Bank of Canada, which has been concerned about the downside risks to the economy. With the outlook for sales positive, there is a better chance …
Rent growth slowing rapidly Increased supply and weaker demand are pushing down rents in several cities. That raises the risk of another leg down for apartment prices, despite the recent drop in mortgage rates. The housing market is struggling for …
17th September 2024
Mission almost accomplished The return of headline inflation to the 2.0% target in August was mainly due to favourable base effects and is likely to be short-lived, with inflation rebounding to as high as 2.5% by the turn of the year. Nonetheless, the …
A brief respite for the manufacturing sector The 0.9% m/m rise in manufacturing sales volumes in July implies there are upside risks to the flash estimate that total GDP was unchanged at the start of the third quarter, although the negative tone of the …
16th September 2024
The sharp rebounds in both residential and non-residential building permit issuance in July eased concerns that the construction sector is about to take a turn for the worse. Risks remain, however, particularly for residential construction in Toronto. …
13th September 2024
There was little impact on GDP from the completion of the Trans Mountain pipeline expansion because the jump in exports was supported by a drawdown of inventories from elevated levels, rather than higher production. There is scope for production to rise …
11th September 2024
Getting an early steer on whether an economy has entered recession requires a holistic assessment of a variety of indicators to see if multiple variables are flagging recession at the same time. In this vein, we have created Economic Momentum Indicators …
9th September 2024
The communications from the Bank of Canada this week suggest that the rise in the unemployment rate in August is unlikely to be enough to trigger larger interest rate cuts, which is probably a sign that the Bank is comfortable with the extent of loosening …
6th September 2024
Unemployment rate heading toward 7% The rebound in employment in August should soothe fears that the economy is taking a turn for the worse, although the 0.2%-point jump in the unemployment rate to 6.6% presents clear upside risks to our forecast that it …
The economy looks to be entering a period of below-potential growth, characterised by excess supply in the goods and labour markets. This will keep downward pressure on core inflation, which we think will reach the Bank of Canada’s 2% target by the middle …
5th September 2024
Following its third consecutive 25bp interest rate cut today, the communications from the Bank of Canada reiterated that further cuts are likely. We expect 25 bp cuts at the final two meetings this year. While Governor Tiff Macklem left the door open to a …
4th September 2024
Another 25bp cut, but little sign the Bank considered a larger move Following its third consecutive 25bp interest rate cut today, the communications from the Bank of Canada reiterated that further interest rate cuts are likely. The tone of the …
Trade balance improves, but for the wrong reasons The improvement in the goods trade balance in July was for the wrong reasons, with a fall in imports outpacing a decline in exports. The weakness was due to sharp declines in motor vehicle trade, which …
Second-quarter GDP growth surprised to the upside of the Bank of Canada’s forecast, but the evidence that growth slowed sharply over the quarter suggests that third-quarter growth will be much weaker than the Bank is anticipating. That raises the chance …
30th August 2024
Despite Q2 upside surprise, data raise chance of a 50bp cut next week Although second-quarter GDP growth surprised to the upside, the downgrade to GDP in June and preliminary estimate that GDP was unchanged again in July imply that third-quarter growth …
Core inflation to come in lower than Bank’s forecast Economic growth remains below potential Bank to cut interest rates by 25bp at each meeting until 2.50% The dovish communication following the last meeting and the encouraging July CPI report leave …
28th August 2024
