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Retail sales point to soft consumption growth The broad-based nature of the weakness in retail sales in March show that high interest rates are weighing on demand and, at the margin at least, provide a bit more justification for the Bank to cut interest …
24th May 2024
Easing in core inflation is being sustained The fourth consecutive 0.1% m/m average increase in the Bank of Canada’s preferred core price measures in April will give the Bank confidence that the further easing in core inflation is being sustained. That …
21st May 2024
The further evidence of softer activity this week might not be enough to persuade the Bank of Canada to cut interest rates in June, but they add to our sense that rate cuts are coming very soon. Momentum fading going into Q2 The recent data suggest that …
17th May 2024
Housing market struggling to bloom The April housing market data show that the spring season is shaping up to be vastly different than last year, with sales dropping back despite higher listings and house prices unchanged. This has caused us to trim our …
15th May 2024
This note answers some of the most frequently asked questions that we received from clients during a recent online briefing about the latest US tariffs on China. Watch the original briefing here . What has been announced? Yesterday was the end of a …
Manufacturing sector faltering The weakness of manufacturing sales in March suggests that the economy lost momentum heading into the second quarter, matching the message from the earlier preliminary estimates for retail sales and GDP. The 2.1% m/m fall in …
The strength of the April labour market data means we now expect the Bank of Canada to begin its loosening cycle in July, rather than June. Nonetheless, the sharp growth in labour supply and moderation in wage growth means we remain confident in our view …
10th May 2024
Surge in employment suggests Bank will wait until July to cut The surge in employment in April shows that the fall in March was just a blip and suggests that the Bank of Canada is now more likely to wait until the July meeting to cut interest rates, …
Canada Chart Pack (May 2024) …
9th May 2024
This interactive dashboard allows you to explore all of our forecasts and key data for Canada. If you have subscriber access to the data underlying this redesigned dashboard, you can download it via the menu options in the top right of each chart or …
After 12 long years, the Trans Mountain oil pipeline expansion finally entered commercial service this week. The pipeline has the potential to raise oil exports significantly, but the full boost is unlikely to be felt for some time. The project increases …
3rd May 2024
Our forecast that the Bank of Canada will cut interest rates earlier and more aggressively than the Federal Reserve means that the loonie is likely to depreciate, but we doubt the move will be large enough to push up imported goods inflation …
2nd May 2024
External demand still weak Despite the slump in March, export volumes grew strongly over the first quarter and net trade appears to have been behind about half of the likely 2.5% annualised rise in first-quarter GDP. Nonetheless, the fall in March and the …
Strong Q1, but growth likely to slow in the second quarter Despite the weaker-than-expected rise in GDP in February, first-quarter growth still looks to be close to 2.5% annualised. The weaker flash estimate for March points to less momentum going into …
30th April 2024
The latest Summary of Deliberations showed division among the Governing Council about when it will be appropriate to cut interest rates. The data released since the April meeting favour the doves, however, so we are sticking to our view that the first cut …
26th April 2024
Retail sales growth disappointing The surprise fall in retail sales in February and the apparent stagnation in March means they had a disappointing first quarter. That reinforces our view that the Bank of Canada is likely to cut interest rates at the next …
24th April 2024
Budget 2024 made a bit of a splash thanks to the unexpected changes to capital gains taxes, but we do not think the new net spending measures were large enough to change the outlook for GDP growth or interest rates this year. The encouraging March CPI …
19th April 2024
Although Finance Minister Chrystia Freeland stuck to her previous pledge to keep the budget deficit below $40bn in the new fiscal year, she nonetheless spent the small windfall afforded to the government thanks to stronger-than-expected revenue growth. …
16th April 2024
New housing policies to provide only modest support The government’s policies to boost affordability for first-time buyers will have only a modest impact on demand, but they still add to our sense that house prices will rise in the coming years. While …
On track for a June interest rate cut The March CPI data showed the third consecutive month of muted gains in the Bank of Canada’s preferred core inflation measures, suggesting that there is a growing chance of the Bank cutting interest rates at its next …
Downside risks to flash GDP estimate for February The unchanged level of wholesale sales and signs that manufacturing GDP contracted suggest that there are downside risks to the flash estimate that GDP rose by 0.4% m/m in February. The 0.7% m/m rise in …
15th April 2024
Finance Minister Chrystia Freeland’s pledge to create the conditions needed for lower interest rates means the government is unlikely to announce much new near-term spending in Budget 2024 next week. Providing that core inflation pressures remain muted, …
12th April 2024
Governor Tiff Macklem sounded relatively dovish in the Bank of Canada’s press conference today, leaving the door open to an interest rate cut at the next meeting in June. While the Bank left the policy rate at 5.0% today, the policy statement and …
10th April 2024
Bank leaves the door open for a June interest rate cut The acknowledgment by the Bank of Canada today that “the data since January have increased our confidence that inflation will continue to come down” leaves the door open to an interest rate cut at the …
The insolvency data released this week show the toll that high interest rates are putting on consumers and businesses. That is unlikely to be enough to persuade the Bank of Canada to cut interest rates next week but, with the cracks in the labour market …
5th April 2024
Cracks growing in the labour market The jump in the unemployment rate in March, together with evidence of easing wage pressures, raises the chance of the Bank of Canada surprising markets with a rate cut next week, although our base case remains that the …
Exports and imports both surged A surge in gold exports and the end of earlier weather-related disruptions flattered the figures in February, but the trade data nonetheless point to a strengthening economy and suggest that net trade made a large …
4th April 2024
Clearer downward trend in underlying inflation But stronger GDP growth reduces the urgency to loosen policy New immigration policy could prompt big forecast changes While the recent inflation data have strengthened the case for interest rate cuts, we …
3rd April 2024
The economy made a strong start to the year, but that was largely due to temporary factors that will soon fade. With spare capacity emerging, particularly in the labour market, downward progress on inflation is becoming clearer. Changes to immigration …
2nd April 2024
The Bank of Canada’s quarterly business and consumer surveys remain consistent with weak GDP growth and generally show that inflation expectations are normalising, but the latter are still too high and raise the risk that the Bank will wait to see …
1st April 2024
The economy made a strong start to 2024, but that was partly due to the end of strike disruption and the record warm winter. We expect GDP growth to slow sharply next quarter, persuading the Bank of Canada to start its loosening cycle in June. GDP surges …
28th March 2024
Strong growth reduces urgency for interest rate cuts The broad-based strength of GDP growth in January and February means the economy almost certainly outperformed the Bank of Canada’s expectations in the first quarter and reduces the immediate risk of …
We still expect the Canadian dollar to depreciate against the US dollar as interest rate differentials relative to the US widen and Canada’s terms of trade worsen. The Canadian dollar has held up well against the greenback relative to other G10 currencies …
27th March 2024
Overview – We expect weak GDP growth of 0.8% this year, and a fall in inflation to less than 2% next year, to persuade the Bank of Canada to cut its policy rate back to 2.5% by mid-2025. A recovery in productivity and looser policy should drive a rebound …
26th March 2024
The government’s plan to cut temporary resident numbers over 2025 to 2027 will result in the weakest three years for population growth in Canada’s 157-year history. While it might not be enough to persuade the Bank of Canada to start its loosening cycle …
25th March 2024
The surprise fall in February leaves CPI inflation on track to average 2.8% this quarter, well below the Bank of Canada’s forecast of 3.2%. As the decline in inflation pressures was broad-based, there is a growing likelihood that the Bank of Canada will …
22nd March 2024
Heading for another decent quarter Despite only modest rises in retail sales volumes in January and February, the earlier strength in December means that growth should remain strong this quarter. The 0.3% m/m fall in retail sales was a little smaller than …
Another good month, but more needed to convince Bank to cut rates The surprise fall in headline inflation to 2.8%, from 2.9%, is further reason to expect the Bank of Canada to cut interest rates soon, although we still think it will wait until June rather …
19th March 2024
Stretched affordability limits future price gains House prices stabilised in February and, despite emerging signs of financial stress among households, we believe that the risk of renewed price declines is limited. Nonetheless, with affordability so …
18th March 2024
Households are offsetting the impact of high interest rates by paying down less of their debt. While that has helped the economy to avoid recession, it also suggests there will be less of a boost from interest rate cuts than in the past, because …
15th March 2024
Temporary rebound in sales volumes Lower prices mean that the muted 0.2% m/m rise in manufacturing sales in January was better than it looked, with sales volumes rising by a much stronger 1.1%. That strength was entirely due to the resumption of …
14th March 2024
The key risk for Canada’s economy from the US presidential election is that a Trump administration could pull out of the USMCA, leaving Canada subject to any US import tariffs. To avoid that, Canada may have to grant concessions such as increased market …
11th March 2024
Governor Tiff Macklem dropped a hint this week that the Bank of Canada may be ready to cut rates by June. There was little in the data to dissuade the Bank, with unemployment rising and bankruptcies surging, while a productivity rebound pulled down unit …
8th March 2024
Wage growth heading in the right direction The Bank of Canada will be relieved to see renewed labour market slack putting downward pressure on wage growth. While the Bank will need to see wage growth soften further before it pivots to rate cuts, we …
Improvement in trade balance may not be a good thing Although the economy appears to have received a large boost from net trade at the start of 2024, the plunge in imports does not bode well for domestic demand and raises the risk that an inventory …
7th March 2024
The Bank of Canada gave little away about the potential timing of interest rate cuts today, although its communications suggest that it is gaining a bit more confidence that inflation is moving in the right direction. We continue to expect the first rate …
6th March 2024
Bank gives little away The Bank of Canada gave little away about the potential timing of interest rate cuts today, although its communications suggest that the Bank is gaining greater confidence that inflation is moving in the right direction. We …
A fall in the participation rate has kept a lid on unemployment in recent months but, given rapid population growth, we continue to expect the unemployment rate to rise to 6.5% later this year. Despite the surge in the population, labour force growth has …
5th March 2024
The return to growth in the fourth quarter means it is probably safe to say that the economy has avoided recession, but that is mainly due to rapid immigration. Per capita GDP fell for the fifth quarter running and is now barely higher than in 2016. Ahead …
1st March 2024
Canada Chart Pack (Feb. 2024) …
29th February 2024
