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The continued weakness in export volumes and softness in imports indicate that the pace of economic growth slowed sharply in the third quarter. As things stand, we think the balance of risks around our GDP estimate of 2.0% q/q annualised growth now lie …
5th October 2017
The current proposals to raise taxes on small business owners will raise little additional revenue for the Federal government and, at a time when the US is considering slashing business tax rates, will leave Canada looking even more out of step. … …
2nd October 2017
The US Commerce Department’s preliminary decision to slap prohibitive countervailing duties on Canadian aerospace firm Bombardier threatens to cause a major trade spat between Canada and the US. According to that US decision, Bombardier’s exports are …
29th September 2017
Real GDP was unchanged in July, suggesting that the economy lost momentum at the beginning of the third quarter. That said, given the strong ending to the second quarter, we aren’t concerned by one weak GDP report. … GDP by Industry …
In his speech today, Bank of Canada Governor Stephen Poloz showed that he remains confident in the economy, suggesting that another interest rate hike is coming this year. That said, we still expect the knock-on effects from a housing downturn to worsen, …
27th September 2017
Although the economy grew strongly over the first half of this year, that growth was still overly dependent on the heavily indebted household sector. That arrangement was possible when interest rates were near record lows and house prices were rising …
25th September 2017
The strong GDP performance over the first half of the year means that Canada will probably finish at the top of the G7 growth ladder this year. More worryingly, however, it also takes first place when it comes to household indebtedness. Rising household …
22nd September 2017
Although the headline inflation rate rose to a moderate 1.4% in August, from 1.2%, the further increases in core inflation are broadly consistent with the reduced slack in the economy. This suggests that the Bank of Canada will probably raise interest …
Manufacturing sales volumes fell by a larger 1.4% m/m in July, the second consecutive monthly decline, confirming that the industrial sector began the third quarter on a soft footing. That said, much of the weakness in July relates to longer-than-normal …
19th September 2017
The latest Census data show that average growth in the median total income of households was disappointing over 2005 to 2015 which might, we suspect, prompt renewed speculation of worsening income inequality. But this showing isn’t any worse than the real …
15th September 2017
The Bank of Canada’s unexpectedly aggressive monetary tightening this year, which stands in stark contrast to the Fed’s over-cautious approach, largely explains the surge in the Canadian dollar this year. We expect that script to be turned on its head …
14th September 2017
The Bank of Canada’s bold call to raise interest rates again so soon after its well-telegraphed July hike caught some investors completely by surprise, resulting in a sharp increase in rate expectations over the next 12 months. As things stand, the market …
13th September 2017
In response to the slump in home sales that began four months ago, the annual rate of house price inflation fell to 13.1% in August, from 14.2%. That slump points to sharply lower house price inflation later this year. … Teranet-National Bank House Prices …
The housing investment boom may have breathed its last gasp last quarter. With existing home sales floundering and average sale prices dropping, tighter mortgage financing rules and ill-timed interest rate hikes from the Bank of Canada have created what …
8th September 2017
The stronger 22,200 gain in employment in August is an encouraging sign for continued income and consumption growth in the third quarter. Meanwhile, the further drop in the unemployment rate to 6.2%, the lowest reading in nine years, is consistent with a …
The Bank of Canada’s decision to raise interest rates for a second consecutive time is a clear sign that policymakers are supremely confident in the economy. Considering the strong pace of recent GDP growth, we can’t rule out another rate hike in October. …
6th September 2017
Despite the recent improvement in global trade activity, merchandise export volumes fell for the second consecutive month in July, hinting at a slower pace of overall economic growth in the third quarter. … International Merchandise Trade …
Although the real economy grew strongly over the first half of this year, that growth still appears to be overly dependent on the heavily indebted household sector. That arrangement was possible when interest rates were near record lows and house prices …
1st September 2017
Despite a drop in housing investment, the economic growth accelerated to 4.5% q/q annualised in the second quarter, led by exports and household consumption. This showing was much stronger than the 3.0% estimate by the Bank of Canada and will embolden it …
31st August 2017
The incoming economic data have been generally strong and will encourage the Bank of Canada to raise interest rates further to 1.00%, from 0.75%, before the end of this year. We wouldn’t rule out a rate hike next week, sooner than the October meeting …
30th August 2017
Household consumption grew very strongly in the second quarter, supported by a further decline in the household saving rate and an acceleration in household borrowing. In the tougher banking regulatory environment this year, however, those trends aren’t …
25th August 2017
Canada’s trade demands heading into the historic NAFTA renegotiations this week didn’t appear to be overly ambitious, in contrast to the much more aggressive approach adopted by the US. Nevertheless, Canada will be lucky to get what it wants and might …
18th August 2017
The increases in headline and core inflation in July are consistent with the recent improvement in economic growth and raise the probability of a second rate hike by the Bank of Canada before December. … Consumer Prices …
The 1.0% m/m decline in manufacturing sales volumes in June was broadly consistent with the drop in non-commodity exports already reported for that month. For the second quarter as a whole, manufacturing activity continued to support strong GDP growth of …
17th August 2017
Resale housing activity in Toronto plunged more than 40% last month and signs point to continued weakness in August. In similar fashion to Vancouver, resale activity will likely flounder over the remainder of this year due to tougher mortgage rules and …
16th August 2017
Although the national annual rate of house price inflation remained at 14.2% in July, this is very much overshadowed by the more recent slump in resale housing activity over the past few months. … Teranet-National Bank House Prices …
14th August 2017
Housing bulls argue that the surge in house prices in recent years and the current strength of new home construction are justified by strong population growth in Canada, but the data suggest otherwise. For more than a decade now, Canada has consistently …
11th August 2017
Despite softening home sales, the incoming data point to solid GDP growth in the second quarter, possibly outpacing the 3.7% q/q annualised rate posted in the first quarter. Needless to say, the performance of the economy over the first half of this year …
4th August 2017
Although employment rose by a moderate 10,900 in July, the much larger gain in full-time jobs and drop in the unemployment rate to 6.3%, from 6.5%, are encouraging and point to stronger wage growth. The Bank of Canada will continue to take encouragement …
The two-month rally in the Canadian dollar, from US$0.73 to US$0.80, doesn’t pose any direct threat to the economy, particularly given the significant decline in the real trade-weighted exchange rate over the past few years. While the higher nominal …
28th July 2017
Despite the recent slump in home resales, monthly GDP growth accelerated by 0.6% m/m in May, which will reinforce the Bank of Canada’s confidence that the economy can perhaps withstand higher interest rates. Needless to say, this further increases the …
The rally in the Canadian dollar to a 14-month high of US$0.79, from US$0.74 a month ago, is likely to fade before year end. While higher oil prices might allow a temporary lift in the coming months, this will be offset by drag from shifting policy …
21st July 2017
Although the headline inflation rate fell to 1.0% in June, from 1.3%, the uptick in two of the three core inflation measures suggests that some of the temporary factors restraining inflation are now fading. Needless to say, this will reinforce the Bank of …
Despite widespread claims by housing pundits that Vancouver’s housing market is recovering from last year’s slump, the incoming data so far this month continue to show that home sales there are floundering. It is true that house prices are still higher …
19th July 2017
Manufacturing sales volumes grew by 1.1% m/m in May, evidence that the industrial sector rebounded in the second quarter. While sales were boosted by a large gain in transportation, there were some encouraging signs elsewhere that domestic business …
The Bank of Canada’s new-found confidence in the economy and forecast rebound in core inflation have prompted speculation that interest rates might rise much higher this year. But with household debt at extremely high levels and the housing bubble already …
14th July 2017
The Bank of Canada’s decision to begin raising interest rates is a gamble that might have to be reversed before long. With the housing bubble already showing signs of bursting and household debt at extremely high levels, higher borrowing costs will dampen …
12th July 2017
The national rate of annual house price inflation rose to 14.2% in June, from 13.9%, driven almost exclusively by a further acceleration in Toronto. But the worsening slump in home sales and higher listings there indicate that the housing market has …
Despite widespread claims by housing pundits that Vancouver’s housing market is recovering from last year’s slump, the incoming data continue to show home sales floundering. More importantly, home sales in the much larger Toronto market have tumbled far …
7th July 2017
Headline employment increased by a stronger than expected 45,300 in June, compared to the consensus estimate of a 10,000 gain, but wage cost pressures remain subdued. Accordingly, there’s nothing in the jobs report that suggests the Bank of Canada should …
Despite a big one-time jump in gold exports, the 2.0% m/m increase in export volumes in May, following fairly strong upward revised gains in the previous two months, builds an even stronger case than before that exporters are finally tapping into the …
6th July 2017
The Bank of Canada’s new-found optimism in the economy means that there is a risk it could raise interest rates very soon, but we don’t think a rate hike next week to 0.75%, from 0.50%, is a foregone conclusion. Although markets are betting that way, we …
5th July 2017
The Bank of Canada’s recent hawkishness doesn’t fit with the weaker core inflation data. Amid further warnings from the BIS about the dangers of sticking too closely to inflation targets when asset bubbles are forming, the Bank might be stealthily heeding …
30th June 2017
The latest Business Outlook Survey highlights that, despite the potential disaster unfolding in the housing market, businesses expect faster GDP growth this year, which obviously explains the Bank of Canada’s new-found optimism. But the Bank can’t ignore …
Despite a slight drop in housing-related activity, GDP increased by 0.2% m/m in April, suggesting that the economy began the second quarter on a stable footing. But given the downswing in home sales, oil prices and drilling over the past two months, it …
After a strong start to the year, the economy now appears on the verge of a slowdown as the housing boom turns to bust. Home sales have tumbled and we fear that the coming correction in house prices will restrain household consumption growth. Even …
28th June 2017
Housing was top of the agenda at a meeting of federal and provincial policymakers earlier this week, amid signs that the Bank of Canada is perhaps preparing to hike interest rates. Meanwhile, with Toronto’s housing market going from bad to worse, there’s …
23rd June 2017
While the drop in the headline inflation rate to 1.3% in May, from 1.6%, can be partly explained by lower energy price inflation, the decline in certain core inflation measures are weaker than most economists expected and further evidence that spare …
Despite hawkish comments from the Bank of Canada, we don’t expect the rally in the Canadian dollar to go much further. Given signs of a correction in the housing market, we doubt that the BoC will hike interest rates this year, while we still expect the …
20th June 2017
The Bank of Canada mentioned this week that the economy is gathering momentum and indicated that it is considering hiking interest rates soon, prompting financial markets to quickly raise bets on a rate hike later this year. But we aren’t convinced the …
16th June 2017
