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Overview – Despite a rockier start to 2021 than we previously anticipated, we continue to expect the economy to recover strongly from the second quarter onwards, as the vaccine rollout allows restrictions to be lifted. Our forecasts for growth of 4.6% …
14th January 2021
Speculation that Bank could cut interest rates looks overdone. Bank set to upgrade its GDP forecasts. Macklem faces communications challenge as Bank attempts to keep yields low. The Bank of Canada is set to upgrade its growth forecasts next week, despite …
13th January 2021
Stronger investment and hiring intentions bode well for 2021 The fourth-quarter Business Outlook Survey (BOS) showed that firms’ hiring and investment intentions are now back to pre-pandemic norms, which bodes well for the economic recovery this year. …
11th January 2021
Ontario and Quebec extended their coronavirus restrictions this week and, given that infections are still rising and logistical problems are holding up the vaccination process, it seems likely that further measures are to come. At the end of last year, …
8th January 2021
Employment to fall again in January The drop in employment in December would have been even larger were it not for the early timing of the survey reference week. With further restrictions imposed across the country since December’s survey was carried out, …
Further rise in exports won’t be enough to prevent fall in first-quarter GDP Exports rose in November and the recent improvement in the business surveys bodes well for growth in the coming months, but the lockdowns suggest that GDP will still edge down in …
7th January 2021
The wide range of forecasts for house prices in 2021 shows that there is still a lot of uncertainty ahead. Nevertheless, given strong demand and low mortgage rates, our view is that prices will continue to rise. According to the Teranet index, house price …
6th January 2021
Recovery to go into reverse in December and January The economy continued to recover at a decent pace in October and November despite the various restrictions imposed on high-risk services, but the broader lockdowns coming into effect in Ontario and …
23rd December 2020
The province-wide shutdowns recently announced in Ontario and Quebec raise the downside risks to our near-term forecasts, although the start of the coronavirus vaccination program last week provides a reason to be hopefully about prospects in 2021. The …
22nd December 2020
It is not just a strong recovery that could surprise some market participants in 2021; a change to the Bank of Canada’s mandate, a snap election, and several other events could also alter the economic backdrop. 1. GDP to surprise strongly to the upside. …
21st December 2020
The provincial government in Quebec this week announced an 18-day “circuit breaker” lockdown, and the authorities in Ontario seem to be planning something similar. We assumed further measures were ahead, so this has not caused us to alter our forecasts, …
18th December 2020
Sales holding up for now Retail sales rose by 0.4% m/m in October, although the sharp falls in gasoline and clothing sales imply that the worsening coronavirus outbreak was beginning to bite. Even if retail sales continue to hold up relatively well, …
Recent developments suggest that inflation will recover more strongly in 2021 than we previously thought. We now expect inflation to be above 2% for most of the year, before dropping back in 2022. Inflation was still low at 1.0% in November (see here ) …
17th December 2020
House prices to keep rising throughout 2021 House price inflation rose to 9% in November and is likely to surpass 10% in the first quarter. We expect house price inflation to slow sharply after that, but prices should keep rising throughout 2021. It was …
Inflation spike a statistical quirk The higher-than-expected rate of inflation in November was mainly a statistical quirk resulting from continued difficulties in collecting price data for travel tours. The same effect could cause inflation to rise by a …
16th December 2020
Due to lower spending and the generosity of government transfers, households are set to save $200bn more in 2020 than in 2019. With that rise equivalent to 14% of consumption, there are upside risks to our already above-consensus GDP growth forecasts if …
15th December 2020
Manufacturing sales recovering only slowly Manufacturing sales only edged up in October and the disruption from the coronavirus at home and abroad is likely to hold back growth in the next few months, but we are more positive about prospects beyond then. …
The Canadian dollar jumped to a two-year high this week and, despite the pledge from the Bank of Canada that it will keep rates low across the yield curve, we think there is still scope for further gains. We have been more optimistic than most about the …
11th December 2020
The key change to the Bank of Canada’s policy statement today was its commitment to “keep interest rates low across the yield curve”. This is in line with our view that, even as the economy rebounds strongly next year, the Bank will prevent the 10-year …
9th December 2020
Finance Minister Chrystia Freeland hinted this week that the government will continue to provide fiscal stimulus until the economy reaches full employment. This is a far cry from concerns elsewhere about public finances and reinforces our view that the …
4th December 2020
Employment to fall in December Employment outperformed expectations last month, but the additional coronavirus restrictions imposed since the November LFS survey was carried out lead us to think it will fall back in December. The 62,000 rise was more than …
Bank was already assuming sizeable economic hit from new waves of the virus. So unlikely to loosen policy amid recent restrictions, despite hints it could do more. Vaccine news and new fiscal plan present upside risks to Bank’s longer-term forecasts. The …
2nd December 2020
The recovery is set to go into reverse in December amid the latest coronavirus restrictions, and we now think GDP will stagnate over the first quarter. But the high effectiveness of the first COVID-19 vaccines increases the chance that economic activity …
Growth to slow sharply GDP expanded by a record 40.5% annualised in the third quarter, as the first lockdowns were lifted, but that still left it 5.3% below its pre-pandemic level. Some more lost ground appears to have been made up in the fourth quarter, …
1st December 2020
The government announced today that it expects to spend an additional $50bn this fiscal year to combat the damage from the second wave of the coronavirus. It also laid out plans for an investment-focused stimulus of between $70bn to $100bn, or up to 4.3% …
30th November 2020
There is now more pressure on Finance Minister Chrystia Freeland to use the fall fiscal update next week to announce short-term measures to support the economy, but we still expect her to outline how the government intends to raise longer-term investment. …
27th November 2020
Retail sales are likely to fall further behind those in the US amid the latest coronavirus-related restrictions, particularly because the Canadian data do a worse job at capturing online sales. Nevertheless, we still expect the longer-term recovery in …
26th November 2020
The decline in restaurant visits in the past month suggests that over 100,000 jobs in the accommodation and food services sector were at risk even before most of the Greater Toronto Area moved into lockdown this week. The accommodation and food services …
24th November 2020
While renewed lockdowns could soon dent home sales, we doubt they would lower prices. There was a modest 0.6% m/m fall in home sales in October, but this was likely due to very low inventory rather than fears about worsening outbreaks of COVID-19. The …
20th November 2020
Sales rose by more than expected The 1.1% m/m rise in retail sales in September was much better than expected, but sales appear to have stagnated in October and the prospect of restrictions being imposed on all non-essential businesses in some cities does …
The high-frequency data suggest the targeted restrictions imposed last month have not weighed much on broader activity, but worsening COVID-19 outbreaks raise the risk that “circuit breaker” lockdowns will be imposed. This would greatly increase the …
19th November 2020
Inflation unlikely to rise further in short term, but long-term risks increasing The unexpected rise in inflation to 0.7% in October, from 0.5%, was mainly due to higher food prices. While renewed restrictions related to COVID-19 could cause prices for …
18th November 2020
Manufacturing sales remain depressed The 1.5% m/m rise in manufacturing sales in September reversed the 1.4% fall in August, but still left sales down 6% y/y. While the business surveys point to another month-on-month rise in October, the increase in …
16th November 2020
The increased likelihood that an effective vaccine will be rolled out next year could eventually lead to a situation in which Canada’s economy outperforms, but the swift U-turn this week on the easing of restrictions in Ontario, as well as the new …
13th November 2020
The rollout of an effective vaccine in early 2021 would cause us to pull up our growth forecasts for next year, but the boost to GDP in 2022 could be much smaller if the improved near-term outlook causes the government to carry out less investment …
10th November 2020
The easing of restrictions in Ontario and the stimulus announced in the province’s delayed 2020 budget bode well for activity, but the recovery could yet be upended by the further spread of the coronavirus. The announcement from Ontario Premier Doug Ford …
6th November 2020
Employment recovery hindered by new restrictions Employment growth slowed sharply in October, but the 84,000 gain was still impressive given that the renewed coronavirus-related restrictions caused employment to fall in some sectors. Moreover, the easing …
The imminent easing of restrictions in Ontario is another reason to think that GDP will keep rising in the fourth quarter, but there is clearly a significant chance that restrictions will be reimposed again soon. The most populous provinces have had …
5th November 2020
Net trade a drag on third-quarter GDP Exports and imports both rose at a similar pace in September and we expect them to continue to edge up over the rest of the year, despite the recent reimposition of domestic restrictions and in key export markets like …
4th November 2020
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
