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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. … …
19th January 2018
The Bank of Canada’s decision to raise interest rates to 1.25% yesterday has reinforced expectations of further rate hikes later this year. According to futures markets, there is a 22% chance of a rate hike to 1.50% as soon as March. Our view is that the …
18th January 2018
The Bank of Canada’s raised interest rates to 1.25% today, from 1.00%, and its more upbeat economic outlook suggests that it will hike rates again later this year, probably in April. In contrast to the consensus, we wouldn’t bet too heavily on further …
17th January 2018
The rise in trade tensions ahead of the sixth round of NAFTA trade talks scheduled to start later this month suggest that those talks could already be doomed. But we still think that there’s a good chance of a new trade deal being made eventually. That …
12th January 2018
The small gain in national house prices in December, boosted largely by Vancouver, didn’t prevent a further slowdown in the rate of annual house price inflation to 9.1%, from 9.2%. The recent slump in home sales, increases in borrowing costs and tougher …
The Bank of Canada will increase interest rates again early this year, possibly as soon as next week, particularly after learning that businesses are more optimistic. That said, we still believe housing woes will become a bigger drag on the economy, …
10th January 2018
The improvement in business sentiment in the fourth quarter of last year, most notably the marked rebound in investment and hiring intentions, suggest that the increased uncertainty around NAFTA isn’t likely to restrain economic growth this year. This …
8th January 2018
Minimum wage hikes this year won’t have significant consequences for the broader economy or inflation, nor do they change the interest rate outlook one way or the other. As we have warned before, the outlook for interest rates hinges on NAFTA’s future …
5th January 2018
The solid 78,600 increase in employment in December and the drop in the unemployment rate to 5.7%, from 5.9%, suggest that the domestic economy is coping well with recent increases in interest rates. This will no doubt fuel speculation that the Bank of …
New housing data showing that non-residents account for only a small fraction of the housing stock and claims that these foreigners aren’t to blame for high housing prices have been meet with ridicule and scorn among locals. We think the new data provide …
22nd December 2017
The stagnation in monthly GDP in October, partly due to a significant decline in mining output, indicate that the economy lost some momentum in the fourth quarter. Even allowing for a rebound in November, it’s fairly obvious that the balance of risks …
The rise in the headline inflation rate to 2.1% in November, from 1.4%, mainly reflects higher energy prices. More importantly, all three core inflation measures remained below the 2.0% target, with the one measure that’s most in tune with low wage …
21st December 2017
The Bank of Canada’s decision to raise interest rates twice this year and the reminder by Governor Stephen Poloz last week that “the economy will need less monetary stimulus over time” have resulted in a further increase in rate expectations over the next …
20th December 2017
Although GDP growth this year was the fastest in three years, the pick-up was partly due to a bounce back from the earlier oil price shock. Unfortunately, the bigger issue now is that declining house prices are eroding household wealth, which will have a …
19th December 2017
The latest balance sheet data show that household indebtedness is even worse than previously thought, but the bigger problem now is that falling home values have begun to erode household net worth. Recent increases in interest rates and tougher mortgage …
15th December 2017
The large 1.5% m/m drop in manufacturing sales volumes in October was much weaker than the consensus estimate, suggesting that broader economic growth slowed at the start of the fourth quarter. … Manufacturing Sales …
The third consecutive monthly decline in the composite house price index in November led to a further slowdown in the rate of annual house price inflation to 10.0%, from 11.4%. The recent slump in home sales, increases in interest rates and tougher …
13th December 2017
The latest wage data indicate that there’s little risk of inflation overshooting the Bank’s 2% inflation target anytime soon. For this reason among others, the Bank has nothing to gain by raising interest rates again early next year as markets expect. We …
8th December 2017
Although the economy probably grew by 3% in 2017, the gains were overly-dependent on the heavily indebted household sector. That was possible when interest rates were near record lows and home values were inflating rapidly. But with higher borrowing costs …
7th December 2017
The Bank of Canada’s decision to keep interest rates at 1.00% today and its cautious policy statement indicate that, in contrast to the market view, it is in no hurry to raise rates again soon. We think that markets are over-estimating the economy’s …
6th December 2017
The rebound in merchandise export volumes in October, following four straight months of declines, is an encouraging start to the fourth quarter. The Bank of Canada will need far more convincing signs of export growth, however, before risking another hike …
5th December 2017
The latest batch of Census data released earlier this week on the labour market cast doubt over the quality of the jobs created since the 2008-09 recession. There are still signs of prime-aged workers being underemployed and more seniors are having to …
1st December 2017
Despite the further slowdown in housing, the continued growth in the economy in the third quarter, and further decline in the unemployment rate in November will undoubtedly strengthen market expectations that the Bank of Canada will resume raising …
The Bank of Canada will leave interest rates at 1.00% at its policy rate meeting next week and, by putting emphasis on the uncertainties clouding the outlook, will signal that it isn’t contemplating raising rates early next year as markets expect. We …
29th November 2017
The legalisation and regulation of marijuana next year will not significantly improve the economic growth outlook, although legitimising a previously black market industry will provide a modest one-off boost to the level of GDP. While it will likely …
24th November 2017
The faster growth in corporate profits in the third quarter is an encouraging sign for economic growth, but the details were less impressive. In addition, with oil prices still relatively low despite recent gains and NAFTA potentially headed for the …
The recent decision by the US to impose countervailing and dumping duties on imports of Canadian softwood lumber appears to have dampened softwood lumber production, despite favourable lumber prices. But this slowdown is broadly consistent with the recent …
21st November 2017
Deputy Governor Carolyn Wilkin’s speech earlier this week suggested that the Bank of Canada is already beginning to doubt its earlier upbeat assessment of the economic outlook, which was behind its decision to hike interest rates twice this year. This …
17th November 2017
The drop in the headline inflation rate to 1.4% in October, from 1.6%, mainly reflects the drop in energy prices, which have already begun to rise again. More importantly, all three core inflation measures remained below the 2.0% target, supporting our …
The 0.5% m/m increase in manufacturing sales values in September, driven by an increase in sales volumes, points to a potential rebound in industrial production. That’s an encouraging sign for GDP growth in that month and is consistent with our …
16th November 2017
The decline in the national composite house price index in October led to a further slowdown in the annual rate of house price inflation to 10.0%, from 11.4%. The recent slump in home sales, increases in interest rates and tougher mortgage financing rules …
15th November 2017
Bank of Canada Governor Stephen Poloz’s speech earlier this week was too dismissive of the current weakness of underlying inflation, although that isn’t a surprise given the Bank’s interest rate hikes this year. Nevertheless, the speech did reveal that …
10th November 2017
The incoming monthly data suggest that economic growth faltered in the third quarter. The news isn’t all bad, but growth prospects for the fourth quarter are somewhat weaker than the third. And unfortunately, economic and political events appear to be …
3rd November 2017
The solid 35,300 increase in employment in October, driven by further gains in full-time work, is an encouraging sign for income and spending in the fourth quarter. Although the unemployment rate edged up to 6.3%, from 6.2%, that was a direct consequence …
After slowing to a complete standstill in July, real monthly GDP contracted by 0.1% m/m in August, a weaker showing than most expected and further evidence of a potentially sharp slowdown in economic activity in the third quarter. … GDP by Industry …
31st October 2017
The unprecedented upswing in the national home ownership rate, fuelled in large part by a credit boom, appears to have peaked and is now going into reverse, even though the aging population should be putting it under upward pressure. We expect further …
27th October 2017
The Bank of Canada’s decision to hold interest rates at 1.00% and its less hawkish policy statement indicate it will take a cautious approach, supporting our view that there will be no further rate hikes this year. Next year, however, we expect the …
25th October 2017
Federal Finance Minister Bill Morneau didn’t deliver any major stimulus in today’s fiscal update, not that it was needed given the economy’s strong performance this year. But the pace of economic growth has already begun to slow and if, as we anticipate, …
24th October 2017
After strengthening to US$0.82 in early September, interest rate differentials have pushed the Canadian dollar back down to US$0.79. We expect a further widening in rate differentials next year, with US rates rising while Canadian rates fall back, to put …
Despite net external trade being a drag, the economy managed to grow by close to 2.0% q/q annualised in the third quarter, partly thanks to a big rebound in non-residential buildings investment. Nevertheless, that’s considerably slower than the torrid …
20th October 2017
The headline inflation rate rose to 1.6% in September, from 1.4%, but the increase was partly due to higher energy prices, which have already begun to fall back. Although some of the core inflation measures edged higher, they remain well below the 2.0% …
The Bank of Canada will probably err on the side of caution at its policy meeting next week by deciding to keep interest rates at 1.00%. Although the Bank still seems confident in the economy, NAFTA renegotiations are clearly going from bad to worse. In …
18th October 2017
The increase in manufacturing sales volumes in August, partly due to a one-off rebound in auto production, was stronger than expected and a positive sign for industrial production in that month. The negative underlying trend in manufacturing over the past …
The final decision to forge ahead with proposals to tighten mortgage rules further will only make matters worse for the already faltering housing market. This will have a far greater impact on house prices than the Bank of Canada recent interest rate …
17th October 2017
The latest Business Outlook Survey shows that, despite concerns about a slowdown in housing and trade policy uncertainty, businesses expect above-potential economic growth ahead. This positive sentiment and the firming in inflation expectations will …
16th October 2017
The most important data releases next week are the Bank of Canada’s Business Outlook Survey and consumer prices. Following its decision to start raising interest rates this year, the Bank will be looking for further positive confirmation from businesses …
13th October 2017
The drop in national home sales that began seven months ago resulted in a further slowdown in the rate of annual house price inflation to 11.4% in September, from 13.1%. A sharper slowdown in price inflation in the coming months is unavoidable. And with …
12th October 2017
Although some measures have edged higher in recent months, we doubt that core inflation will return to the 2% inflation target anytime soon. Even if the output gap closes by the end of this year, the past appreciation of the Canadian dollar and muted wage …
11th October 2017
Federal banking regulators decision to forge ahead with recent proposals to tighten mortgage rules further will only make matters much worse for the already faltering housing market. Needless to say, this will have a far greater impact on house prices …
6th October 2017
Although headline employment rose by a moderate 10,000 in September, the 112,000 rebound in full-time employment is a positive sign for income and consumption growth. In addition, the Bank of Canada will take comfort from the fact that the unemployment …
