Filtered by Subscriptions: Canada Economics Use setting Canada Economics
Upside surprise keeps the pressure on the Bank Overall inflation pressures were stronger than anticipated in November and the 3-month annualised measures of CPI-trim and CPI-median both increased. This supports our view that the Bank of Canada will err on …
21st December 2022
Jump in rents drives upside surprise in inflation Overall inflation pressures were stronger than anticipated in November and support our view that the Bank of Canada will err on the side of hawkish caution with a final interest rate hike in the new year. …
Sales volumes struggling for momentum Retail sales volumes are struggling for momentum and, with the services spending indicators also showing some weakness, household consumption may be heading for a second consecutive quarterly contraction. The 1.4% …
20th December 2022
One third of the rise in household net worth during the pandemic has now been reversed and the further fall in house prices in November points to another deterioration this quarter. Lower net worth, in turn, is a headwind to consumption in 2023. Net …
16th December 2022
New listings fell in November but, because they are taking longer to sell, the inventory of homes for sale continued to rise. That is one reason to expect house prices to fall further, particularly if lenders fail to pass on the decline in wholesale …
15th December 2022
As several forecasters now seem to share our view that the economy will suffer a moderate recession next year, in this Update we discuss the risks that could result in a much deeper downturn. The key risk is that economists are underestimating the impact …
14th December 2022
Sales volumes continue to struggle The strong rise in manufacturing sales in October was largely due to a jump in refined petroleum prices. Manufacturing sales volumes were unchanged and the business surveys point to outright falls ahead. The 2.8% m/m …
The Bank of Canada’s 50bp rate hike this week means that variable mortgage rates are now more than 400bp higher than the start of the year. This raises the risk that some will be forced to sell their homes, although there was little evidence of …
9th December 2022
The Canadian dollar has underperformed most other currencies over recent weeks, and we expect it to depreciate further against the US dollar over the first half of next year. The loonie has been the worst performer among major currencies since the US CPI …
Overview – The economy is heading for a moderate recession, as higher interest rates weigh on domestic demand and exports contract amid the global downturn. Weaker demand, together with lower commodity prices and an easing of supply shortages, should …
8th December 2022
The Bank of Canada delivered a somewhat dovish 50bp rate hike today, by softening its explicit forward guidance that interest rates will need to rise further. Our GDP and inflation forecasts suggest there is little need for the Bank to raise rates …
7th December 2022
The end of the tightening cycle? The Bank of Canada delivered a somewhat dovish 50 bp policy rate hike today by softening its explicit forward guidance that interest rates will need to rise further. We would not rule out a final 25 bp interest rate hike …
Export volumes struggling despite boost from agricultural sector The essentially unchanged level of export volumes in October, despite big gains in agricultural and pharmaceutical exports, suggests the sector is struggling amid weaker global demand. …
6th December 2022
Export volumes struggling despite boost from agricultural sector The essentially unchanged level of export volumes in October, despite a big boost from higher agricultural exports, suggests that the sector is beginning to struggle amid weaker external …
The national accounts data provided two pieces of good news this week, with revisions to the historical series and stronger-than-expected third-quarter growth leaving GDP higher than expected. While some argue that this will cause the Bank of Canada to …
2nd December 2022
Unemployment rate declines despite slowdown in hiring The slowdown in hiring in November did not prevent a decline in the unemployment rate, as the labour force contracted. The Bank of Canada will be more encouraged by the fall in the 3-month annualised …
Unemployment rate declines despite slowdown in hiring The slowdown in hiring in November was not enough to prevent a renewed decline in the unemployment rate, as the labour force contracted. The Bank of Canada will be more encouraged by the fall in the …
Higher interest rates weighing on domestic demand Core inflation pressures eased in October Bank to drop down to 25 bp hike as it balances risks of over- and under-tightening The easing of the three-month annualised measures of core inflation in October …
30th November 2022
Domestic demand contracts for first time since Q2 2021 The stronger-than-expected gain in third-quarter GDP tips the odds slightly toward another 50 bp interest rate hike from the Bank of Canada next week. But, with domestic demand contracting for the …
29th November 2022
Domestic demand contracts for first time since 2021 The stronger-than-expected gain in third-quarter GDP tips the odds slightly toward another 50 bp interest rate hike from the Bank of Canada next week. But, with domestic demand contracting for the first …
Research from the Bank of Canada suggests that half of all variable-rate, fixed-payment mortgage holders have now hit their so-called trigger rates, which means their payments will rise. This is one factor weighing on spending, with retail sales volumes …
25th November 2022
The big surprise so far this year has been the resilience of housing starts which, despite falling from their 10-month high of 300,000 annualised in September, remained at a relatively strong 267,000 in October. While developers have largely shrugged …
24th November 2022
Although the annual rates of core inflation increased in October, we suspect the Bank of Canada will point to the declines in the 3-month annualised rates of CPI-trim and CPI-median to justify dropping down to a 25 bp interest rate hike at its meeting …
22nd November 2022
Retail sales struggling for momentum The small fall in retail sales volumes in September appears to have been reversed in October but, more generally, sales volumes have been little changed for the past six months and the low leve of consumer confidence …
Although the data this week showed renewed rises in the annual rates of CPI-trim and CPI-median inflation in October, our calculations show that the timelier 3-month annualised measures both declined. That could persuade the Bank of Canada to drop down …
18th November 2022
Weak new home sales weigh on housing starts The plunge in new home sales in Toronto in September points to further falls in housing starts, although there are at least some signs that the worst may be behind us for home sales and that the pressure on …
16th November 2022
Core inflation pressures better than they look Although the annual rates of CPI-median and CPI-trim edged up in October, the 3-month annualised rates that the Bank of Canada is now focussed on declined. As that for CPI-median is now in the 1% to 3% …
Core inflation pressures better than they look Headline inflation was unchanged at 6.9% in October and the CPI-median and CPI-trim measures of core inflation increased, but the latter was mainly due to unfavourable base effects. It appears that the …
Manufacturing sales volumes set to fall further Manufacturing sales volumes edged down in September and, with the business surveys continuing to weaken and inventory levels now looking unusually high, they are likely to fall further. We expect weaker …
15th November 2022
Bank of Canada Governor Tiff Macklem said this week that the unemployment rate will need to rise to help restore price stability, but he also played down the significance of the strong gains in employment and average earnings in October. That suggests …
11th November 2022
The modest fiscal loosening unveiled in the Fall Economic Statement this week is unlikely to move the needle much for monetary policy, but the surge in employment in October and the acceleration in wage growth nevertheless leave the Bank of Canada’s …
4th November 2022
Jump in employment and wage growth pressures the Bank to do more The 108,300 surge in employment in October makes a mockery of claims that the economy is on the cusp of recession and, with wage growth accelerating sharply despite favourable base effects, …
The $6bn in new federal spending measures for this year, as outlined in the Fall Economic Update , amount to just 0.2% of GDP and will have little impact on the economic outlook or monetary policy. By utilising only a small part of the windfall from …
3rd November 2022
Export strength overshadowed by record fall in building permits The improvement in crop yields boosted export volumes in September, but the strength of exports was overshadowed by the also-reported record slump in building permits, which suggests that …
Export outperformance overshadowed by record fall in building permits The improvement in crop yields boosted export volumes in September, but the outperformance of exports was overshadowed by the also-reported record slump in building permits, which …
The Bank of Canada now judges that there is a 50/50 chance of GDP growth turning negative, which caused it to slow the pace of its tightening to a 50 bp hike this week and to hint that it will drop to a 25 bp at the final meeting of the year. We assume …
28th October 2022
Economy performed better than feared last quarter GDP performed better than expected last quarter but, with the business surveys weakening significantly, growth is likely to slow to a crawl this quarter and we expect a mild recession in 2023. The 0.1% m/m …
Economy performed better than feared last quarter The economy performed better than expected last quarter but, with the business surveys deteriorating in recent months, GDP growth is likely to slow to a crawl this quarter and we expect a mild recession in …
Governor Tiff Macklem shifted his tone notably today, reassuring that the Bank was “trying to balance the risks of over- and under-tightening”, whereas previously the emphasis had stressed that it was better to tighten too much rather than too little. …
26th October 2022
Bank slows pace of tightening despite ongoing inflation concerns Today’s smaller 50 bp interest rate hike, which took the overnight rate to 3.75%, suggests that the Bank of Canada is growing confident that its actions so far will be enough to vanquish …
The rebound in global oil prices over the past month has not been matched by those in Canada, with Western Canadian Select (WCS) instead trading closer to $60 per barrel, as the discount between WCS and the US WTI benchmark has widened to a …
25th October 2022
The data released this week showed that higher interest rates are yet to have much of a negative impact on construction or consumption and that core inflation is proving stickier than anticipated. This has prompted us to upgrade our forecast for the …
21st October 2022
Consumers shrug off higher interest rates The stronger-than-expected gain in retail sales in August and preliminary estimate of only a small decline in September show that higher interest rates are yet to weigh on consumption, which is another reason to …
Paul Ashworth, our Chief North America Economist, and Stephen Brown, who leads our coverage of Canada’s economy, held a client briefing shortly after the BoC’s October meeting. The team addressed key issues, including: Whether the Bank will accept a …
20th October 2022
Improvement in headline CPI inflation not matched by core Consumers’ near-term inflation expectations continue to rise Not enough evidence yet for the Bank to slow the pace of its tightening Governor Tiff Macklem has told us that the Bank of Canada …
19th October 2022
Strength of core inflation points to another 75 bp hike The Bank’s core CPI inflation measures were unchanged in September but, as we expected a decline due to more favourable base effects, that increases the odds of another 75bp interest rate hike next …
Strength of core inflation points to another 75 bp hike The Bank’s core CPI inflation measures were unchanged in September but, given that we expected a decline due to more favourable base effects, that probably increases the odds of another 75bp hike …
The surge in housing starts to a 10-month high in September casts doubt on our view that there is much worse still to come for residential investment, especially as the recent stabilisation of the sales-to-new listing ratio implies that the downward …
18th October 2022
Mixed messages on inflation expectations The Bank of Canada’s quarterly surveys offer some evidence that aggressive policy tightening is having the intended effects, with widespread fears of recession leading to a moderation in wage expectations and an …
17th October 2022
