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Developments this week suggest it will take a much greater deterioration of the outlook for the Bank of Canada to deliver additional monetary support, leaving the onus on Finance Minister Chrystia Freeland to deliver further fiscal stimulus. The Bank was …
30th October 2020
Third-quarter growth to be 47% annualised The 1.2% m/m rise in GDP in August and the preliminary estimate of a 0.7% gain in September confirm that the initial recovery has been stronger than first anticipated. The latest restrictions will contribute to a …
While the Bank of Canada today trimmed the pace of its QE purchases, we agree with its claim that the program should be as stimulative as before providing those purchases are focused on longer-term bonds as it signalled. Moreover, the Bank’s enhanced …
28th October 2020
A Democratic clean sweep in the US election is probably the scenario that would be most beneficial for Canada’s GDP, but the effects would still be far outweighed by other factors. The US election has the potential to impact the Canadian economy through …
27th October 2020
The restrictions reimposed in Ontario and Quebec this month have weighed heavily on restaurant visits, but we think overall GDP will continue to recover so long as more draconian lockdowns are avoided. The OpenTable data show that visits to restaurants …
26th October 2020
There was plenty of data this week for the Bank of Canada to digest ahead of its meeting, yet none of this will have much bearing on the key question of how the second wave of COVID-19 will play out. The activity data for August showed only small rises in …
23rd October 2020
Bank to emphasise downside risks to the outlook. Policy rate to remain near-zero until “inflation target is sustainable achieved”. Balance sheet expansion set to resume next year. The economy has recovered faster than the Bank of Canada expected, but …
21st October 2020
Inflation set to remain low The September data showed that the housing boom is now feeding through into higher inflation, but the headline rate is nevertheless set to remain below 1% for the rest of this year. The rise in inflation to 0.5%, from 0.1%, was …
The Bank of Canada’s balance sheet has been shrinking in recent weeks, as demand for its emergency repos loans continues to subside, and it will experience a bigger fall next spring, when the 12-month repo loans made at the height of the …
20th October 2020
We are upgrading our already above-consensus forecast for the Canadian dollar, as we expect higher oil prices, stronger-than-expected GDP growth, and favourable interest rate differentials to drive a continued appreciation over the next two years. Those …
19th October 2020
Decline in sales likely to be temporary The 2.0% m/m decline in manufacturing sales in August was caused by a drop back in motor vehicle sales to more normal levels. The strong rise in rail freight volumes in September bodes well for sales last month. The …
16th October 2020
This week brought more news that the Canadian economy rebounded strongly as the lockdowns were eased over the summer. But the slowdown in employment growth in August is an early warning that the pace of recovery may be losing some momentum, at a time when …
4th September 2020
Labour market recovery losing momentum The 245,800 increase in employment in August means that nearly 2 million of the 3 million jobs lost during the pandemic lockdowns have now been recouped but, with the pace of the recovery now slowing – 418,500 jobs …
Deficit widens, as both exports and imports rebound strongly The merchandise trade deficit widened to $2.5bn in July, from $1.6bn, as imports of motor vehicles rebounded by more than exports in the same category. But the good news is that, with imports …
3rd September 2020
We think the Bank of Canada’s GDP forecasts are too weak given it assumes there will not be a second wave of the virus. Even if there is one, the Bank is likely underestimating the potential for inflation to rise. The Bank’s July Monetary Policy Report …
29th July 2020
Partial rebound still leaves exports down 30% on pre-pandemic level The merchandise trade deficit unexpectedly narrowed to $0.7bn in May, from $4.3bn, as exports were boosted by the reopening of motor vehicle production plants and the rebound in crude oil …
2nd July 2020
It is by no means inevitable that the coronavirus crisis puts a big permanent hole in the supply capacity of economies (i.e. their ability to produce goods and services). With the right government policies, many economies should be able more or less to …
29th June 2020
The government confirmed this week that former Senior Deputy Governor Tiff Macklem will take the helm from Governor Stephen Poloz in June. (See here .) We doubt the change will materially affect the way the Bank approaches monetary policy, but it is clear …
1st May 2020
In light of the accelerating spread of the coronavirus – and the economic disruption that is likely to follow – we are pulling down our GDP growth forecasts for Q1 and Q2 of this year. Growth is likely to rebound over the second half of the year, but most …
2nd March 2020
Canadian economy hitting soft patch The 0.1% m/m decline in October’s monthly GDP was partly due to disruption in the motor vehicle sector caused by the GM strike south of the border, but retail and wholesale GDP also contracted . We expect November’s GDP …
23rd December 2019
Sales hit by strike-related disruption The 0.7% m/m decline in manufacturing sales in October was entirely due to a further decline in motor vehicle sales, which reflects the impact of the strike by GM workers south of the border. As a result, we …
17th December 2019
We expect the Bank of Canada to leave its key policy rate unchanged next week, as fears of stoking the flames of the resurgent housing market outweigh the risk that economic growth will slow by more than expected this quarter. After peaking in early 2016, …
29th November 2019
House price inflation picks up – with even Vancouver enjoying a rebound House price inflation edged up to a four-month high of 0.7% y/y in September, from 0.6%, and the strength of the recent rebound in sales points to a further rally, which should extend …
18th October 2019
Sales volumes remain stagnant Retail sales values increased by 0.4% m/m in July, but were unchanged in volumes terms, which supports our view that, after a brief surge in the second quarter, third-quarter GDP growth will drop back to between 1.0% and …
20th September 2019
Slight dip in employment not a major concern The 2,200 decline in employment in June is not a concern given that the economy created an average of 50,000 jobs per month over the first five months of this year. That torrid pace was never sustainable, so …
5th July 2019
The latest Business Outlook Survey somewhat surprisingly shows that Canadian firms have convinced themselves a recovery is just around the corner, even though the weak global backdrop and evidence of a slowdown south of the border would seem to suggest …
28th June 2019
The recent rebound in new home sales in Toronto is an encouraging sign that the local housing market is not about to emulate the sharp falls in prices in Vancouver. 4,794 new homes were sold in Toronto in May, up nearly 100% from the same month a year …
Downside risk to oil & gas output in H2 The solid 0.3% m/m gain in monthly GDP in April supports our view that second-quarter GDP growth was between 2.5% and 3.0% annualised. But that strength was mainly due to a recovery from a series of disruptions in …
We expect an average of the Bank’s core inflation measures to remain close to 2% this year, before declining in 2020, as GDP growth falls below potential. An average of the Bank of Canada’s three core inflation measures reached a seven-year high of 2.1% …
25th June 2019
Given that an average of the Bank’s three core inflation measures reached a seven-year high in May, policymakers may welcome the disinflationary effect that the appreciation of the loonie this week will have. A stronger exchange rate will make life even …
21st June 2019
Retail sales rose by just 0.1% m/m in April, partly because the introduction of the carbon tax weighed on gasoline sales volumes. Total retail sales declined in volume terms and the weakness of consumer confidence suggests that retail sales growth will …
The upside surprises in core and headline inflation in May reduce the chance of the Bank cutting interest rates in the next few months. But we expect core inflation to drift back down in the second half of the year and, if GDP growth drops back as we …
19th June 2019
The full details of the new first-time buyer (FTB) equity loan scheme do not change our view that it will have little effect on the housing market. While the recent drop in mortgage rates will help to support house prices, we still expect a drop in new …
18th June 2019
Temporary plant shutdowns in the automotive sector explain why manufacturing sales fell in April, but the further drop in the Markit manufacturing PMI in May suggests that underlying demand remains weak. … Manufacturing Sales …
Wage growth looks set to rise modestly, but the effect on unit labour costs is likely to be offset by a rebound in productivity growth. This suggests that core inflation will remain close to 2.0% in the second half of the year. We expect it to decline in …
17th June 2019
Any boost to spending from the Raptors’ NBA finals victory won’t make up for weakness elsewhere, with Export Development Canada reporting this week that its semi-annual Trade Confidence Index has slumped to a seven-year low. … Exporters left Kawhi-ing in …
14th June 2019
Annual wage growth according to the Labour Force Survey looks set to rise towards almost 4% in the coming months, but experience suggests that it is probably exaggerating the true strength of wages. As the proportion of firms facing labour shortages has …
13th June 2019
The risk of a recession is arguably higher in Canada than elsewhere and the low level of interest rates limits the ability of the Bank of Canada to respond. Even if the Bank utilises unconventional policy tools, any subsequent recovery would be slow if it …
10th June 2019
April’s trade data painted a positive picture of the manufacturing sector, but the further fall in the manufacturing PMI in May suggests that the outlook for exporters is bleak. Conditions could worsen if global trade tensions continue to escalate as we …
7th June 2019
Another strong month for employment and a further rise in wage growth seems to support the Bank of Canada’s view that the recent economic slowdown was mainly due to temporary factors. But with both the domestic and international business surveys …
April’s trade data point to net trade making a very large positive contribution to GDP growth this quarter, following the large negative contribution in the first quarter. … International Merchandise Trade …
6th June 2019
Although the Bank of Canada’s expectations for first-quarter GDP growth were more accurate than our own, we still think the Bank is underestimating the strength of the rebound in growth this quarter. Beyond that, the further declines in the business …
5th June 2019
While the Bank of Canada presented a fairly balanced policy statement alongside its decision to keep interest rates unchanged at 1.75% this week, in the speech that followed a day later Senior Deputy Governor Carolyn Wilkins told us that policymakers …
31st May 2019
The first-quarter weakness in GDP growth won’t convince the Bank of Canada to cut interest rates, since the Bank knew that temporary disruptions would weigh on the economy. Nevertheless, if we are right and GDP growth doesn’t rebound in the second half of …
The Bank of Canada today argued that the recent economic slowdown has been largely due to temporary factors, but that growing global trade tensions mean that “the degree of accommodation being provided by the current policy interest rate remains …
29th May 2019
The slump in the US activity surveys in May and the big drop in oil prices this week add to the reasons to expect the Bank of Canada to maintain a cautious tone at its meeting next week. … More reasons for the Bank to remain …
24th May 2019
The one bright spot over the past six months has been the strength of the labour market. The Labour Force Survey revealed a record-breaking 107,000 jump in employment in April. Even the more reliable Survey of Payrolls, Employment and Hours showed strong …
23rd May 2019
The economy is performing better than the Bank of Canada previously expected, but the outlook remains challenging. We expect the Bank to keep policy unchanged next week and anticipate another fairly dovish policy statement. … Bank to remain cautious …
Retail sales growth was flattered in March by higher gasoline prices and the unwinding of temporary factors that had weighed on sales in February. We expect overall consumer spending growth to lag behind incomes growth in the coming years as heavily …
22nd May 2019
The housing market showed some promising signs of life in April, with home sales rising strongly. House price inflation slowed, however, and is likely to remain very low. … Housing shows signs of …
17th May 2019
