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While the US midterm results mean that there is now even more uncertainty about when the USMCA might be signed by Congress, we do not think that the trade deal itself is in doubt. Meanwhile, there were some positive signs for the housing market this week, …
9th November 2018
With investors already pricing in three more rate hikes from the Bank of Canada, it’s hard to see much support for the consensus view that the Canadian dollar will rise by 5% from here. We think that further falls in oil prices and fewer rate hikes than …
5th November 2018
While the data this week revealed that GDP was better than expected in August, the growth rate nevertheless slowed. Combined with September’s trade data which showed a fall in manufacturing exports, and Markit’s October PMI which fell to the lowest level …
2nd November 2018
October’s further decline in wage growth is a worrying signal for policymakers, with real wage growth stagnating just as the Bank takes a more hawkish approach to normalising policy. … Labour Force Survey (Oct.) & Int. Trade …
Although the pace of growth slipped in August, the small rise GDP was still stronger than indicated by the timelier data. That will encourage policymakers and suggests that the Bank of Canada remains on track to hike interest rates again as soon as …
31st October 2018
As well as hiking interest rates to 1.75% this week, the Bank of Canada explicitly confirmed that it intends to raise the policy rate back to its estimate of the neutral rate. We doubt it will make it that far. … Bank aiming for at least three more …
26th October 2018
By replacing its pledge to raise rates at a “gradual” pace with an indication that it intends to hike by at least as much as, if not more than, markets expect, the Bank of Canada today struck a decisively hawkish note. We think it will follow today’s …
24th October 2018
The third-quarter Business Outlook Survey revealed a rebound in firms’ investment intentions, which is consistent with machinery and equipment investment growth remaining close to 10% y/y. Moreover, the survey was carried out before the US and Canada …
23rd October 2018
After the legalisation of cannabis this week, next week the spotlight turns to the Bank of Canada’s policy rate announcement. The Bank looks set to raise interest rates for the third time this year, to 1.75%. As that hike is widely expected, the key event …
19th October 2018
September’s unexpectedly sharp drop in headline inflation will not prevent the Bank of Canada from following through with a widely-expected rate rise at its meeting next week. But further falls in core inflation would be a risk to our view that the Bank …
The markets are convinced that the Bank of Canada will hike its overnight rate by another 25bp to 1.75% at next week’s policy meeting and it isn’t hard to see why. Economic growth has been solid this year and probably a touch stronger than the Bank’s …
17th October 2018
August’s drop in manufacturing sales was almost entirely due to temporary plant shutdowns in the automotive sector. Sales are therefore likely to rebound in September, particularly with surveys pointing to healthy growth ahead. … Manufacturing Sales …
The Bank of Canada’s latest Business Outlook Survey shows that growing capacity constraints are boosting investment intentions, which will reinforce expectations that the Bank will raise interest rates again at next week’s policy meeting. … Business …
15th October 2018
The steep falls in equities this week are bad enough, but it is the collapse in Canadian oil prices that could have more significant macroeconomic effects. If the capacity constraints that have caused Canadian oil prices to slump are sustained, it would …
12th October 2018
After accelerating in September for the first time in 16 months, house price inflation could rise a touch further in the near term, but there is little hope of anything more than a temporary and partial rebound. … Teranet House Prices …
Based on our forecast for economic growth to slow, there is little prospect of the Bank of Canada raising interest rates by another 100bps over the next year. Even if the economy maintained its recent strong pace of growth, raising interest rates by that …
10th October 2018
The changes to Canada’s trading relationship with the US and Mexico do not, on their own, have big implications for the economy. By removing uncertainty, the agreement will help to keep economic growth at a healthy clip for the next couple of quarters. …
5th October 2018
September’s impressive rebound in employment is another reason to think that the Bank of Canada will pull the trigger on a rate hike later this month. While we think that the current strength of the economy will cause the Bank to follow that with another …
The recent run-up in oil prices, yesterday’s announcement of a new massive LNG project and the coming expansion in the capacity to export crude oil by rail all seem to bode well for energy investment. But uncertainty about future pipeline capacity and the …
3rd October 2018
While the macroeconomic implications of replacing NAFTA with USMCA are minor, the diminished risk of US auto tariffs is good news for the Canadian economy. The effective removal of that threat could see the loonie rise further in the coming weeks and may …
1st October 2018
Comments from US President Donald Trump this week gave little indication that he is about to trigger the six-month NAFTA withdrawal period, but there is a rising risk of the US imposing auto tariffs on Canada, which could turn out to be more damaging than …
28th September 2018
The stronger-than-expected 0.2% m/m rise in GDP in July suggests that annualised growth in the second quarter may turn out to be closer to 2.0% than the 1.5% we had pencilled in. … GDP by Industry …
Households’ debt service costs rose to 14.2% of incomes in the second quarter, the highest since 2008. The recent rise has been driven entirely by higher interest rates. Moreover, policy rate hikes over the past year have yet to fully feed through to …
27th September 2018
Economic growth looks set to remain healthy in the near term, which will prompt the Bank of Canada to raise interest rates twice more. But the Bank is underestimating both the extent to which construction activity will contract and the negative effects …
26th September 2018
The loonie continued to appreciate against the greenback this week, despite there seemingly being little chance of the US and Canada reaching a NAFTA deal before the month-end deadline. Investors appear to be under-pricing the risk of President Donald …
21st September 2018
Headline inflation looks set to continue falling to around 2% by the end of the year, as energy price inflation drops back. But with all three of the Bank of Canada’s core inflation measures picking up in August, the decline in headline inflation is …
The third consecutive rise in Canadian manufacturing sales in July puts the sector on track for a very strong third quarter. Another fall in new orders suggests that growth may be close to a peak, but that could be reversed if a NAFTA deal is reached …
18th September 2018
The NAFTA negotiations between Canada and the US rumbled on this week, with few signs of a breakthrough during what Foreign Affairs Minister Chrystia Freeland described as a “continuous negotiation”. With the month-end deadline for a deal still two weeks …
14th September 2018
After dropping to a nine-year low in August, house price inflation looks set to rebound in the coming months, but we doubt that turnaround will be sustained. Meanwhile, lower-than-expected capacity utilisation in the second quarter suggests that there is …
12th September 2018
The large build-up in private sector debt over the last decade means that the Canadian economy is far more sensitive to interest rate rises than in the past. This increases the likelihood that the Bank of Canada’s rate hikes could trigger a potentially …
10th September 2018
While the Bank of Canada this week acknowledged the uncertainty created by the ongoing NAFTA negotiations, it also played down the risks of a further deterioration in trade relations. However, given the potential for US President Donald Trump to trigger …
7th September 2018
Although August’s sharp drop in employment simply reversed July’s gain, the concentration of losses in high-wage service jobs and construction is concerning. Coupled with a further slowdown in earnings growth, August’s Labour Force Survey presented few …
While the Bank of Canada left its interest rates unchanged today it appears to be heading for a hike in October, although a serious breakdown in the NAFTA negotiations could result in a last minute delay. … Bank likely to raise interest rates in …
5th September 2018
The unexpected narrowing of the trade deficit in July to just $0.1bn, from June’s $0.7bn, suggests that economic growth might hold up a bit better than we expected in the third quarter. … International Merchandise Trade …
While the US and Canada are aiming to reach a compromise over NAFTA today, at this stage it’s still unclear whether this will happen. Either way, next week the Bank of Canada will take the spotlight. The Bank looks set to keep policy unchanged, even if a …
31st August 2018
The strong pace of growth in the second quarter, and a NAFTA deal if it materialises by Friday, will embolden policymakers. Nevertheless, the Bank of Canada is still likely to keep to its commitment to proceed gradually with interest rate rises, by …
30th August 2018
Even if NAFTA negotiations are concluded successfully this week, the Bank of Canada is likely to wait until October before it raises interest rates. … Bank on pause ahead of October rate …
29th August 2018
Today’s announcement of a bilateral trade agreement is definitely good news for Mexico and the US, but could be good or very bad for Canada. More generally, it illustrates that, despite the Trump administration’s intransigence over trade disputes in …
27th August 2018
Consumer spending growth appears to have rebounded to about 2% annualised in the second quarter. But with real wage gains set to slow further, even that fairly-moderate growth rate seems unlikely to be sustained. … Spending growth set to …
24th August 2018
The merchandise trade deficit narrowed to a 17-month low of $0.6bn in June, thanks to a 4.1% monthly rise in exports and a small fall in imports. But both moves were largely due to big swings in aircraft trade. The big picture remains that non-energy …
23rd August 2018
While retail sales values and volumes both fell in June, over the second quarter as a whole growth rebounded. However, the slowdown in housing market activity and rising interest rates will limit sales growth in the second half of the year. … Retail Sales …
22nd August 2018
Headline inflation might surpass 3% in August, but by the end of the year it is likely to be little more than 2%. And with core inflation stable, the Bank is unlikely to pick up the pace of its tightening. … Inflation to drop back towards …
21st August 2018
The declines in commodity prices this week following the crisis in Turkey highlighted the connections that make Canada more vulnerable than many advanced economies to developments elsewhere in the world. While this week’s moves alone mean little for the …
17th August 2018
The jump in headline inflation to 3.0% in July, from June’s 2.5%, was partly due to rising energy prices but also appeared to reflect a pick-up in general inflationary pressures. We think that the Bank of Canada’s commitment to take “a gradual approach” …
June’s gain in sales was flattered by the energy sector, but the key take away is that another rise in unfilled orders bodes well for growth in the third quarter and suggests inflationary pressures are building. … Manufacturing Sales …
16th August 2018
The decline in the national rate of house price inflation to a five-year low of 1.8% in July is likely to be followed by further weakness in the months ahead. For now, house prices seem more likely to stagnate than to fall outright, but the risks arguably …
14th August 2018
A quick NAFTA deal is an upside risk to our forecast for the loonie to remain near its current rate against the US dollar this year. But our forecasts for various commodity prices to decline and interest rate differentials to move against Canada implies …
13th August 2018
The sudden escalation in political tensions between Canada and Saudi Arabia this week seems alarming, but investors are right not to fret about the consequences. After all, Canada sends just 0.2% of its exports to Saudi Arabia and financial links between …
10th August 2018
Although the 54,000 rise in employment in July blew the consensus out of the water, it was driven largely by temporary jobs, and average earnings growth dropped sharply. Despite the positive headline figure, today’s release does little to boost the chance …
Despite the recent stabilisation of some housing market indicators, steep falls in new home sales this year imply that construction activity will drop sharply over the coming 12 months. … Construction to drag down GDP …
9th August 2018
