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Bank of Canada Governor Stephen Poloz used a speech this week to argue that relying on monetary policy alone to counteract economic downturns risks further stoking financial imbalances. While Poloz reiterated that the Bank intends to raise interest rates …
22nd February 2019
A rise in auto sales helped drive a better-than-expected outturn for retail sales in December. Sales volumes were unchanged over the fourth quarter, though, suggesting that consumer spending growth was weak. … Retail Sales …
Against the backdrop of slowing global demand growth, the high level of manufacturing inventories in Canada is an underappreciated downside risk to GDP growth. … High inventories a downside risk to …
21st February 2019
Temporary factors that boosted inflation in 2018 are fading and recent declines in unit labour costs growth suggest that core inflation will fall this year. That supports our view that the Bank of Canada’s next move will be to cut interest rates. … Core …
19th February 2019
Alberta’s oil production cuts have successfully reduced the Canadian oil price discount compared with US benchmarks, but their success has produced some unintended negative consequences. … Oil by rail exports plummet, USMCA hurdles …
15th February 2019
The unexpected slump in manufacturing sales in December was principally due to continued problems in petroleum refining, but the weakness extended well beyond that sector and suggests that Canada did not escape the sudden global industrial downturn at the …
14th February 2019
The 0.1% monthly decline in the Teranet House Price Index in January equates to a decent 0.4% m/m increase in seasonally-adjusted terms. But the annual pace of house price inflation dropped back to just 2.2%, and sales-to-new listing ratios suggest that …
13th February 2019
There seems little chance of Canada’s banking regulator greatly easing the severity of the mortgage stress tests introduced last year, but the government is considering helping first-time buyers in its 2019 budget. That would support the broader market, …
11th February 2019
Data this week confirmed that annual mortgage credit growth slowed to a 35-year low of just 3.1% in December, with the slowdown reflecting subdued home sales and lower house price inflation. More worryingly for the outlook, after some promising signs of …
8th February 2019
January’s outsized 67,000 jump in employment will temper fears that the recent economic weakness is worsening. But with annual earnings growth unchanged at 2%, there are still no signs of rising inflationary pressures from the labour market. … Labour …
A softening economy, slow wage growth and a drop back in oil prices are all reasons to doubt that the loonie’s recent strong run will be sustained. We see the currency declining to $0.72 this year. … Loonie’s strong run unlikely to be …
6th February 2019
With wages boosted last year by minimum wage hikes and the labour market now facing several headwinds, we doubt that a meaningful pick-up in wage growth is on the cards for 2019. … Bank of Canada too optimistic on wage …
5th February 2019
Senior Deputy Governor Carolyn Wilkins this week outlined the Bank of Canada’s thinking on wage growth. But by failing to repeat the Bank’s normal mantra about raising interest rates further, what Wilkins didn’t say is perhaps more significant than what …
1st February 2019
November’s fall in GDP appears to have been followed by further weakness in December and January. With economic growth set to slow sharply this year, the Bank of Canada is unlikely to follow through with its pledge to raise interest rates further. … GDP …
31st January 2019
The drop in gasoline prices in recent months is good news for households’ purchasing power, but we doubt they will spend all of their windfall. In fact, limited scope for further strong house price gains suggests that consumers will save more of their …
29th January 2019
At Davos this week, Governor Stephen Poloz reiterated that the Bank of Canada will remain data dependent with respect to the pace of future interest rate hikes. With GDP set to have contracted in November, and the incoming data this week looking decidedly …
25th January 2019
The Bank of Canada’s fourth-quarter Business Outlook Survey revealed a sharp deterioration in firms’ expectations for future sales. In fact, the future sales balance dropped into negative territory for the first time since 2011. On past form, that seems …
24th January 2019
Although November’s fall in retail sales partly reflected lower gasoline prices, sales still fell in volume terms. Indeed, sales volumes appear to have contracted for the second quarter running last quarter. Given the recent strength of employment, this …
23rd January 2019
November’s sharp fall in manufacturing sales partly reflected some temporary disruption, so sales probably rebounded in December. Nevertheless, echoing the weakness seen in many other countries, the Canadian manufacturing sector appears to have had a very …
22nd January 2019
The data this week confirmed that Canadian home sales finished 2018 on a weak note, while inflation jumped back up to 2% at the end of the year. Housing sales are unlikely to rebound strongly, while inflation is set to drop back to 1.7% or lower in …
18th January 2019
December’s rise in inflation mainly reflected a statistical quirk and will be more than reversed in January. Indeed, we expect inflation to drop below 1.5% in the coming months. … Consumer Prices …
With a host of indicators suggesting that GDP growth will weaken, we think that the risks of a pronounced slowdown are larger than either the Bank of Canada or the consensus assumes. … Business cycle indicators point to slowdown …
The 0.3% seasonally-adjusted rise in house prices in December masked very divergent trends between cities. Sales-to-new listing ratios suggest that this divergence will widen in the coming months, with house price inflation in Montreal likely to rise …
14th January 2019
Governor Stephen Poloz struck a positive tone following the Bank of Canada’s decision to keep interest rates unchanged this week. Although officials remain optimistic, we think there are flaws in the Bank’s thinking and the case for further rate hikes is …
11th January 2019
Despite slashing its economic growth forecast to below potential, the Bank of Canada reiterated today that it judges that more rate hikes will be needed to ensure that inflation remains in line with target. But if we’re right that even the Bank’s new …
9th January 2019
Given the huge amount of new supply set to reach the housing market this year, the recent deterioration in home sales is bad news for house prices. While house price weakness will be painful, the end of the construction boom will have even larger …
8th January 2019
The further widening of the trade deficit in November mainly reflected a sharp drop in export values due to the recent slump in oil prices. Nevertheless, non-energy export volumes also fared poorly and the recent deterioration evident in international …
Officials at the Bank of Canada face a challenging landscape when they meet next week. Not only have global markets been volatile, but the Canadian yield curve has moved closer to inversion territory and data this week showed that the housing market …
4th January 2019
The 9,000 increase in employment in December was better than expected and, encouragingly, suggests that November’s bumper 94,000 gain was more than just a statistical quirk. But for anyone who still believes that interest rate hikes are coming, the …
With the sudden slump in oil prices over the last three months likely to weigh heavily on economic growth, and fears of a global downturn building, we expect the Bank to keep rates unchanged and strike a dovish tone at its policy meeting next week. … …
2nd January 2019
Two of the Bank of Canada’s three measures of core inflation, CPI-trim and CPI-median, declined in November. As a result, an average of the three measures fell to 1.9%, the lowest in five months. Base effects mean that core inflation will probably decline …
21st December 2018
The slump in the Business Outlook Survey future sales balance looks consistent with GDP growth falling towards zero and is another reason to doubt that the Bank of Canada will raise interest rates further. … Business Outlook Survey …
In an interview this week, Bank of Canada Governor Stephen Poloz seemed fairly relaxed about the economic outlook. But with inflationary pressures fading, oil prices falling again and exporters becoming less confident about the outlook, there is little …
The economy performed better than expected at the start of the fourth quarter. But with a number of factors likely to have weighed on growth in November, October’s data are little reason to think that the Bank of Canada will soon raise interest rates …
November’s sharp decline in headline inflation reflects the recent slump in energy prices. But with two of the three core inflation measures softening too, there’s even more reason for the Bank of Canada to take a cautious approach to additional interest …
19th December 2018
The global slowdown is beginning to weigh more on the Canadian factory sector, with manufacturing sales values declining by 0.1% m/m in October. Admittedly, sales volumes increased by 0.2% m/m, but the three-month-on-three-month annualised growth rate of …
18th December 2018
If the emerging diplomatic spat with China escalates further, there are a number of measures that China could use to inflict economic damage on Canada. But given that Canada’s trade exposures to China are relatively small, such measures by themselves …
17th December 2018
While Canadian oil prices have rallied in recent weeks, we expect discounts against international oil benchmarks to widen again next year, which will weigh heavily on energy investment and economic growth in 2019. Otherwise, the downward revision to …
14th December 2018
The economy is set to weather the slump in oil prices better than it did in 2015, but it will not escape unscathed. The housing market looks shaky and there are signs that higher interest rates are starting to weigh on consumer spending. Even if the Bank …
13th December 2018
Base effects caused annual house price inflation to rise again in November, but it will decline in the coming months. Meanwhile, the sharp fall in capacity utilisation in the third quarter is another sign that inflationary pressures are abating. … Teranet …
12th December 2018
The Bank of Canada reiterated this week that it intends to raise the policy rate at least three more times, but acknowledged the uncertainty surrounding the pace of those hikes. Investors appear to be coming round to our view that the Bank will pause …
7th December 2018
The 94,000 surge in employment was nine times stronger than the consensus forecast, but the gains were led partly by Alberta where the outlook has recently deteriorated markedly. Meanwhile, the further drop in wage growth leaves scope for the Bank of …
The unexpectedly large widening of the trade deficit in October is a sign of things to come, as continued falls in energy prices in November will have pushed export values down further. The planned cuts in energy production could also hit exports early …
6th December 2018
Despite the recent slump in oil prices, the Bank of Canada confirmed today that it intends to raise interest rates at least three more times. However, we think that a deterioration in the economy will cause the Bank to stop hiking rates sooner than it …
5th December 2018
The combined effect of Alberta’s forced oil production cuts and the slump in oil prices on activity in the sector are set to push Canadian GDP growth down to around 0.5% annualised in the first quarter. … GDP growth heading toward zero in first …
4th December 2018
The sharp downward revisions to the saving rate imply that households are even more vulnerable to higher interest rate than we had previously thought. In that environment, the Bank of Canada’s plan to raise interest rates repeatedly could be a serious …
3rd December 2018
This week’s media coverage painted far too positive a picture of foreign direct investment in Canada, which remains lower than a year ago and after the recent slump in oil prices is likely to deteriorate further. Next week, the focus will turn to the Bank …
30th November 2018
The economy’s third-quarter performance was weaker than the headline GDP gain of 2.0% annualised suggests. Consumer spending growth slowed sharply, while investment contracted for the second quarter running. Given the mounting headwinds from lower oil …
We suspect that the Bank of Canada will deliver a more dovish message next week than investors seem to expect. … Bank to present cautious message as oil prices …
28th November 2018
The recent slump in oil prices has invoked memories of the 2015 crash, but the Canadian economy looks less vulnerable this time round. Back then, WTI had hovered at close to $100 for four years and investment had picked up accordingly. As the run-up and …
27th November 2018
