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The US decision to exit the Iran nuclear accord pushed crude oil prices up to four-year highs this week, but prices are probably still too low to trigger a renewed investment boom in the Canadian oil sands because of the relatively high breakeven costs of …
11th May 2018
The unexpected 1,100 decline in employment in April is probably nothing to worry about given the strength of the gains in recent months and that unseasonably bad weather last month may have played a role. … Labour Force Survey …
Earlier this week, Bank of Canada Governor Stephen Poloz gave a remarkably sanguine speech on the build-up in household debt. He concluded that, although record-high debt represented a risk and means the economy is more sensitive to rising interest rates, …
4th May 2018
The widening in the trade deficit to a record high of $4.1bn in March, from $2.9bn, was not as bad as it seems since exports increased by 3.7% m/m and, although imports increased by a very strong 6.0% m/m, the gains were principally in the motor vehicles …
3rd May 2018
The 0.4%m/m rebound in monthly GDP in February, which was slightly stronger than the 0.3% consensus estimate, will renew speculation that the Bank of Canada will resume raising interest rates soon, but we still think the Bank will remain on the side …
1st May 2018
This week brought a furious last-minute push from all sides to reach a provisional deal on updating NAFTA, ahead of July’s Mexican presidential election. The US congressional mid-term elections won’t take place until November but, if a deal is going to be …
27th April 2018
Consumption growth was the key driver behind the Canadian economy’s recent strength, particularly in the first half of last year. Since mid-2017, however, retail sales volumes have largely stagnated. The housing slowdown appears to have played a role, …
25th April 2018
The recent resurgence in oil prices should be good news for Canada but, since it is partly due to a temporary spike in geopolitical tensions, we expect prices to fall back later this year. Domestic crude oil prices have enjoyed a particularly strong run, …
20th April 2018
The headline CPI inflation rate edged up to a three-year high of 2.3% in March, from 2.2%, but the Bank of Canada will be relieved to see that its new core inflation measures remained largely unchanged at close to the 2% mid-point of the target range. … …
The Bank of Canada left its key policy rate unchanged at 1.25% at today's Governing Council meeting and, although the markets still anticipate a further 25bp rate hike later this year, we think the Bank is done tightening policy and may need to reverse …
18th April 2018
The 1.9% m/m rebound in manufacturing sales in February means that the factory sector made a solid contribution to first-quarter economic growth but, looking further ahead, the softness of unfilled orders and rise in inventories suggest that contribution …
17th April 2018
Earlier this week we learned that, according to Teranet, national house price inflation slowed to a two-year low of 6.6% in March, from 7.5% in February and a recent peak of 14.2% in mid-2017. Based on the latest sales-to-listings data, the growth rate of …
13th April 2018
The Bank of Canada is unlikely to hike interest rates again at its Governing Council meeting next Wednesday. Even with the risk of NAFTA’s demise fading and core inflation picking up, there is now a good chance that faltering economic growth and growing …
12th April 2018
The latest Business Outlook Survey could unnerve the Bank of Canada since it suggests that GDP growth will slow to below potential this year, while at the same time there are clear signs of mounting price pressures. On balance, we still expect the Bank to …
9th April 2018
The US administration appears to be pushing hard to get a deal done on NAFTA, reigniting speculation of further interest rate increases from the Bank of Canada. Even if a trade deal is done, however, we doubt that the Bank would risk raising rates again …
6th April 2018
Despite the recent slowdown in economic growth, the labour market churned out a solid 32,300 gain in employment in March, enough to keep the unemployment rate at its ten-year low of 5.8%. Hourly wages increased at a slightly faster rate also. Overall, …
The widening of the trade deficit in February isn’t a big concern because it was driven by an increase in imports, which points to growth in domestic demand. The small rebound in exports, which comes after a much larger decline in the previous month, is …
5th April 2018
The incoming labour market data provide further evidence of a potential household-led slowdown in economic growth this quarter. This supports our view that the Bank of Canada won’t risk increasing interest rates again this year … Labour data point to …
29th March 2018
The decline in monthly GDP in January was partly due to interruptions in the oil & gas industry and the recent slump in home sales, something which we fear could mark the start of a potentially prolonged economic slowdown this year. In contrast to the …
We expect GDP growth to halve from 3.0% in 2017 to 1.5% in 2018, as tighter regulation and higher borrowing costs bring the housing boom to an abrupt end. We anticipate that growth will remain weak in 2019, even as the Bank of Canada reverses course and …
28th March 2018
Prices of domestic heavy crude oil appear to be going sideways, despite rising world oil prices. This trend has persisted for a few months, but there are still good reasons to believe that these heavy oil prices will rebound over the next few months. If …
23rd March 2018
The rise in the annual headline and core inflation rates in February appear to be largely due to higher gasoline inflation and base year effects, things which the Bank of Canada will look through at its policy rate meeting next month. Nevertheless, with …
The further drop in home sales last month confirms that the slowdown in trend sales that began around a year and a half ago has worsened. Unfortunately, prospective home buyers and sellers are now fighting against rising global interest rates, tougher …
20th March 2018
The 2016 Canadian Income Survey shows that the median household hasn’t benefitted meaningfully from economic growth in recent years. Real incomes of middle-class families have been largely stagnant, casting doubt on the credibility of the economic …
16th March 2018
The further decline in manufacturing sales volumes in January, broadly consistent with the drop in non-commodity exports already reported for that month, provides further evidence that the economy began this year on a softer footing. … Manufacturing Sales …
The small income-driven decline in the household debt-to-income ratio in the fourth quarter of 2017 provides a glimmer of hope that the economy might be able to successfully grow its way out of debt. But with signs pointing to a national house price …
15th March 2018
The renewed decline in house prices in February suggests that the housing market is in a price correction. Tougher mortgage rules and recent increases in interest rates have negatively impacted home sales and this will continue to depress prices. … …
14th March 2018
The Canadian dollar rebounded yesterday following the confirmation that Canada’s economy will be exempt from US tariffs on steel and aluminium. It isn’t out of the woods yet, however. NAFTA’s future still hangs in the balance, its fate in the hands of the …
9th March 2018
The small 15,400 rebound in employment in February, following the much larger drop the month before, was underwhelming and suggests that the underlying trend in hiring has softened, echoing the recent slowdown in GDP growth. … Labour Force Survey …
The Bank of Canada implied in its policy statement this morning that, despite growing concerns around trade, it still believes further interest rate increases will be needed later this year. That said, in its decision to keep rates at 1.25%, there were …
7th March 2018
The narrowing of the merchandise trade deficit in January is actually a concern because it was driven by a large decline in imports, which points to weakening domestic demand. In addition, the further fall in exports highlights once again that the economy …
The 2018 Federal budget delivered earlier this week, which kept corporate income tax rates unchanged, failed to address the unease among executives about business taxation, in light of the large tax cuts recently enacted in the US. In addition, Canada’s …
2nd March 2018
The weaker-than-expected fourth-quarter GDP growth of 1.7% q/q annualised, following a downward-revised 1.5% pace in the previous quarter, was driven by household consumption and housing which, with interest rates rising and household debt at a record …
The Bank of Canada will raise interest rates again this year, most likely at the April policy meeting. In contrast to the consensus, we don’t see a series of further rate hikes beyond this. NAFTA’s potential demise cannot be ruled out. Meanwhile, the …
28th February 2018
Finance Minister Bill Morneau didn’t deliver any new major tax or spending measures in the 2018 Federal Budget, despite massive US corporate tax cuts and widespread fears of NAFTA’s potential demise. While we don’t think NAFTA’s end would torpedo Canada’s …
27th February 2018
The Bank of Canada’s preferred core inflation measures have trended higher and are close to the 2% inflation target. Despite the drop in headline inflation in January, the core inflation data will reinforce market expectations of yet more interest rate …
26th February 2018
There are some tentative signs that the past tightening in mortgage rules and increase in interest rates are beginning to have an impact beyond housing by negatively impacting household spending too. In addition, there is also evidence that household debt …
23rd February 2018
The small decline in the headline inflation rate to 1.7% in January, from 1.9%, mainly reflects a drop in gasoline price inflation due to base effects. The Bank of Canada’s three preferred core inflation measures are now closer to the 2% target. So, …
Global bond markets have been shaken by the recent run of stronger wage and price inflation figures in the US. Although we have long expected that a rebound in core inflation south of the border would prompt the Fed to hike US interest rates more …
16th February 2018
The resurgence in Vancouver house prices wasn’t enough to prevent a decline in the annual growth rate of the Teranet composite house price index to a 21-month low of 8.7% in January, from 8.9% in the final month of last year and a peak of 14.2% in …
14th February 2018
The early regional evidence from Toronto and Vancouver revealed that the tightening of mortgage lending standards at the start of this year did hit home sales in January, but the declines were not disastrous. Perhaps more surprising was the steep drop-off …
9th February 2018
The hike in Ontario’s minimum wage to $14.00 an hour on January 1st, from $11.60, had a devastating impact, with 59,300 part-time jobs lost in the first month alone, equivalent to 4.3% of part-time employment in the province. … Labour Force Survey …
The widening in the trade deficit to $3.2bn in December, from $2.7bn, illustrates that Canada is still struggling to benefit from the broad acceleration in global economic growth. The stagnation in real export volumes in the final month of last year adds …
6th February 2018
The Canadian economy had a pretty good year in 2017, with GDP growth accelerating to 2.9%, up from 1.4% in 2016 and only 1.0% in 2015. But last year was a tale of two halves, with exceptionally strong growth in the first half of 2017 and a marked slowdown …
2nd February 2018
The 0.4% m/m increase in November’s GDP was reassuring after the near-stagnation in October, and December was probably a good month too, but we remain concerned that growth will slow in the first half of this year. … GDP by Industry …
31st January 2018
The Canadian dollar hit 81 cents against the US dollar earlier this week but, rather than blaming the loonie’s rally on the Bank of Canada and its recent interest rate hike, the rebound appears to be linked more to the recent resurgence in crude oil …
26th January 2018
The gradual strengthening in core inflation evident in December’s consumer price figures would seem to justify the Bank of Canada’s recent decision to raise interest rates again. … Consumer Price Index …
The news that Canada has reached a deal on a new free trade agreement with the remaining ten TPP countries is no game changer since, even in the long term, the boost to Canadian GDP will be a trivial 0.1%. Nevertheless, like the earlier CETA agreement …
23rd January 2018
The Bank of Canada’s upgraded GDP growth forecast for this year looks overly optimistic given NAFTA and housing-related risks. Despite further increases in household borrowing costs and tougher new mortgage lending rules, the contribution to growth from …
19th January 2018
The 2.5% m/m rebound in manufacturing sales volumes in November, which was partly due to a rebound in auto production after a union strike ended, points to some modest upside risk to our fourthquarter GDP growth estimate of 1.5% q/q annualised. … …
