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The local real estate board data suggest that home sales fell further in June but, with new listings declining as well, house prices look set to keep rising. The data released this week showed that home sales fell by another 9% m/m in Toronto in June, …
9th July 2021
Easing of restrictions lifts employment, but hours worked disappoints The stronger-than-expected rise in employment in June confirms that labour shortages are not holding back the recovery, but the weakness in hours worked still suggests there are …
Economy has developed as expected, so Bank likely to announce further taper Bank to keep signalling interest rates on hold until at least second half of 2022 New measures of labour market slack may shed light on reaction function As it is widely …
7th July 2021
The sheer scale of the surge in residential investment since the pandemic means it now presents a key downside risk to the outlook. At best, the widely held assumption that residential investment will remain high for years looks too rosy. At worst, a …
6th July 2021
Consumers and firms expect rise in inflation to be temporary The Bank of Canada’s latest surveys show more evidence of inflationary pressures building but, given firms and consumers expect higher inflation to be temporary, the Bank is unlikely to be too …
5th July 2021
The upward revision in March and smaller-than-expected fall in April mean that GDP is now on track to surpass its pre-pandemic level in July, a couple of months earlier than we previously thought. This raises the chance that the Bank of Canada will …
2nd July 2021
Semiconductor shortage weighs on exports Exports were weaker than expected in May, but that was largely due to the ongoing global semiconductor shortage rather than weakening external demand. And with the rise in imports boding well for domestic demand, …
Canadian firms are not currently suffering from labour shortages to the same extent as those in the US but, with immigration still muted, the issue is likely to get worse as the economy continues to recover. The clearest sign that labour shortages are not …
30th June 2021
GDP not as weak as first thought The 0.3% m/m decline in GDP in April was smaller than Stats Can initially suggested and implies that, despite the third coronavirus wave, the economy held up relatively well. We now expect second-quarter GDP growth to be …
The dramatic fall in lumber prices over the past month has captured a lot of attention, but it is the more gradual rally in oil prices that is likely to have the greatest bearing on the economic outlook. That said, we are not convinced it will be …
25th June 2021
The latest CFIB Business Barometer shows that, as the re-opening process got underway, firms’ selling price expectations surged in June. Firms now expect to raise their prices by an average of 4.7% over the next 12 months, which is by far a record high. …
Sales fell sharply in April and again in May The recent lockdowns caused retail sales to plunge by 5.7% in April and the preliminary estimate implies they fell sharply in May as well. The outlook is much brighter, with the record level of consumer …
23rd June 2021
The introduction of new weights for the June CPI means that some of the item-specific price increases that we expect will not push up headline inflation by as much as we thought. Nevertheless, there still seems scope for inflation to rise to 4% over the …
18th June 2021
Housing, re-opening and supply constraints lifting inflation The rise in inflation to 3.6% in May was driven by several factors including ongoing global supply constraints, the booming housing market, and the start of the re-opening process. While …
16th June 2021
Struggling due to supply shortages Manufacturing sales volumes slumped 3.3% m/m in April, as the disruption from the global semiconductor shortage intensified. While sales volumes should gradually rise again from May, it will be some time before overall …
14th June 2021
The communications from the Bank of Canada this week confirmed that it is not worried about inflation surpassing its forecasts for this year, and that it remains committed to keeping the policy rate unchanged until economic slack is fully absorbed. …
11th June 2021
The Bank did not provide any new hints about the direction of policy in its statement today but, with GDP likely to start growing strongly again this month as the coronavirus restrictions are lifted, we expect the Bank to cut the weekly pace of its asset …
9th June 2021
Semiconductor shortage weighs heavily on trade The global semiconductor shortage weighed heavily on exports and imports of motor vehicles in April and this disruption continued in May. While exports elsewhere performed better, the broad-based weakness of …
8th June 2021
The latest data suggest residential investment, which rose to more than 10% of GDP in the first quarter, has already peaked. With the Bank of Canada meeting next week, the key issue for policymakers is to what extent future declines could weigh on the …
4th June 2021
Continued restrictions weigh on employment The continued coronavirus restrictions caused employment to fall for the second month running in May but, with re-opening now underway across the country, employment should rise strongly in the coming months. The …
Recent economic weakness should be offset by stronger third quarter Tone of policy statement likely to be similar to April Bank may signal further reduction in asset purchases likely at the July meeting Inflation surpassed the upper limit of the Bank of …
2nd June 2021
After strong Q1, growth appears to have slowed sharply in Q2 The first-quarter data confirm that the economy took the second coronavirus wave in its stride but, with the preliminary estimate showing that GDP fell in April, the third wave has been much …
1st June 2021
The re-opening plans set out in the last couple of weeks point to strong gains in GDP over the summer. Given supply constraints, we expect the increase in activity to result in higher inflation than most expect. Ontario, Quebec, British Columbia (BC) and …
28th May 2021
The jump in inflation to 3.4% in April was stronger than most forecasters expected and, with firms’ selling price expectations rising again in May, there seem to be further upside risks to inflation over the rest of the year. We expect inflation to …
27th May 2021
Over the next few years, there is potential for increased “green” investment to more than offset the negative economic effects of measures such as further carbon tax hikes. But given the economy’s reliance on fossil fuel extraction, it is hard to take …
26th May 2021
The latest Financial System Review (FSR) suggests that the Bank of Canada’s concerns about high house price inflation are a key risk to our view that it will wait until early 2023 before raising interest rates. The FSR highlighted that, despite the fall …
21st May 2021
Strong end to Q1 but sales hit hard by lockdowns in April After reaching a record high in March, the preliminary estimate suggests that the lockdowns caused retail sales to slump in April. There is likely to be only a small rise this month given stores …
The Bank of Canada has voiced concern about the loonie although, following the signs of emerging inflationary pressures in April, it will probably be more welcoming of the disinflationary impact of the strong currency. Either way, the Bank’s concern about …
20th May 2021
Inflationary pressures emerging The large 0.6% m/m seasonally-adjusted rise in prices in April shows that the jump in inflation to 3.4% was not due to base effects alone. With firms’ selling price expectations elevated, we expect inflation to remain close …
19th May 2021
After being constrained for months by a lack of supply, vaccinations in Canada are now outpacing those in every other G20 nation. Nevertheless, the cautious approach by policymakers suggest that restrictions will still be in place for a while longer. …
14th May 2021
Manufacturing sales volumes fell in the first quarter The 2.3% m/m rise in March was not enough to prevent manufacturing sales volumes from falling during the first quarter. The sector should perform better in the second quarter, but sales volumes are …
We now expect inflation to surpass the upper limit of the Bank of Canada’s 1% to 3% range for most of the rest of the year, but we continue to think that it will drop back to less than 2% in 2022. The focus has been on US inflation this week and, after …
13th May 2021
Home sales appear to have declined in April and further falls could act as a headwind to the recovery over the rest of the year. Sales plunged by a seasonally-adjusted 20% m/m in Toronto last month and by 7% in Vancouver, while they were unchanged in …
7th May 2021
Slump in hours worked implies GDP fell in April The third coronavirus wave caused the labour market recovery to go into reverse in April and, with no imminent sign of the restrictions being eased, there is little chance of a meaningful rebound this month. …
The further strong rises in commodity prices present upside risks to our GDP forecasts, although the boost to growth is likely to be smaller than during previous periods of strong commodity price gains. The Bank of Canada’s commodity price index (BCPI), …
6th May 2021
Net trade made positive contribution to first-quarter GDP growth The much stronger rise in imports than exports in March partly reflects the unwinding of temporary factors that weighed on imports in February. Net trade contributed positively to …
4th May 2021
During his appearance before the Standing Committee on Finance this week, Governor Tiff Macklem faced questions about why the Bank of Canada is still adding further stimulus through its QE purchases, even though inflation is set to spike to more than 3% …
30th April 2021
Q1 growth could be stronger than US, but third wave to weigh on Q2 At 0.4% m/m in February, GDP growth was a bit weaker than Stats Can first thought but, with the preliminary estimate pointing to a much larger 0.9% m/m rise in GDP in March, first-quarter …
The ratio of homes under construction to population growth is at a record high, reflecting both the strength of housing starts and the weakness of immigration. (See Chart 1.) While the boom in construction might seem like a much-needed response to the …
29th April 2021
The proposed national preschool system could increase the labour force, and therefore potential GDP, by 1.2%, but the impact will be spread over many years and might be dwarfed by changes to immigration. The headline policy in the 2021 Budget (see here ) …
28th April 2021
Retail sales to drop back again in April The gains in retail sales in February and March are likely to be reversed this month, but the high level of consumer confidence suggests spending will recover quickly once the coronavirus restrictions are lifted. …
Reflecting the additional fiscal support confirmed in the 2021 Budget this week, the Bank of Canada has raised its GDP growth forecasts to be closer to our own. Nevertheless, we do not expect the Bank to raise its policy rate as soon as its new guidance …
23rd April 2021
The Bank of Canada’s decision to trim its asset purchases and pull forward its guidance on interest rates confirms that it has become more upbeat about the economic outlook. We expect it to bring its QE program to a close by the end of 2021 but remain …
21st April 2021
Base effects exaggerate inflationary pressure Despite a muted monthly rise in prices, inflation jumped to 2.2% in March due to base effects. It will surpass 3% in April for the same reason. While inflation should then ease, we expect it to remain above 2% …
Tight supply and buoyant demand to drive acceleration in house price growth House price inflation according to the Teranet index surpassed 10% in March for the first time since 2017, and the high sales-to-new listing ratio implies it will continue to …
20th April 2021
The additional stimulus outlined in today’s Budget was in line with our expectations and, while a few of the proposals will raise eyebrows, the total package should help to support a strong economic recovery. The $101bn of fresh spending measures …
19th April 2021
We expect the government to unveil further stimulus measures worth a little more than 4% of GDP next week, and anticipate a slightly more dovish message from the Bank of Canada than markets are pricing in. Budget 2021 The government told us in its Fall …
16th April 2021
Semiconductor shortage weighs on manufacturing sales The 1.6% m/m fall in manufacturing sales in February was primarily due to the negative effect on the auto sector of the global semiconductor shortage. While that shortage has persisted into March and …
15th April 2021
Economy outperforming the Bank’s January forecasts Bank to slow pace of asset purchases GDP forecasts to be revised higher, but timing of first interest rate hike still in 2023 The Bank of Canada is set to cut the pace of its asset purchases next week. …
14th April 2021
House prices look increasingly vulnerable to future rises in interest rates. While the economy coped well the last time the Bank of Canada’s rate hikes shook the housing market in 2017 and 2018, the risks are greater now because residential investment …
13th April 2021
