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The economy has grown strongly over the past few quarters and business confidence has risen. On closer examination, however, business investment has fallen to historically low levels, partly because of the past slump in commodity prices. Although energy …
19th May 2017
Although the headline inflation rate remained at 1.6% in April, the decline in core inflation provides further evidence of disinflationary pressures in the economy. Spare capacity and very low wage pressures will likely keep core inflation below the 2% …
Although manufacturing sales values rose by a strong 1.0% m/m in March, this largely reflected higher prices rather than strong sales volumes. Nevertheless, the stronger gains in unfilled orders and inventories indicate that a recovery in production is …
17th May 2017
While the Bank of Canada will likely hold interest rates at 0.50% next week, the balance of risks around its neutral stance on the interest rate outlook are beginning to tilt to the downside, mainly due to oil price volatility, trade policy uncertainty …
The recent drop in the Canadian dollar to US$0.73, from US$0.75, presumably reflects new fears of a global oil supply glut, which have been weighing on crude oil prices. Although this downward pressure might persist in the near term, we still expect oil …
12th May 2017
Despite a record high in Toronto, the national rate of annual house price inflation edged down to 13.4% in April, from 13.5%, reflecting the rapid slowdown in Vancouver and falling house prices in some other smaller regions. … Teranet-National Bank House …
Average home sale price data contain far more timely market information about potential turns in the housing cycle than the aggregate house price indices that are more closely watched. That said, all sale prices need to be viewed within the context of …
5th May 2017
The meagre 3,200 increase in employment in April, which included a big decline in full-time jobs, was a disappointment and will reinforce the Bank of Canada’s view that policy needs to remain highly accommodative. … Labour Force Survey …
Although export volumes grew by 2.3% m/m in March, that followed a big decline the month before, with exports increasing only trivially in the first quarter as a whole. This poor export performance justifies the Bank of Canada’s cautious stance on the …
4th May 2017
The financial difficulties at alternative mortgage lender Home Capital Group (HCG) don’t necessarily mark the end of the housing boom, since it is too small to matter. But with signs that the housing bubble has already begun to burst in Vancouver and the …
2nd May 2017
The decision by the US Commerce Department to impose preliminary import duties of close to 20% on Canadian softwood lumber isn’t a big surprise to domestic producers, nor will it seriously threaten lumber production or the broader economic outlook. More …
28th April 2017
Despite further gains in housing-related activity, monthly GDP was unchanged in February, dragged down by weakness in export-orientated manufacturing. This demonstrates that, despite the strength in GDP over the preceding few months, the Bank of Canada is …
The economy likely began this year strongly, with real GDP expanding at an annualised quarterly growth rate of 4.5%. The strength in monthly housing and consumption indicators, however, show that the household sector remains the main growth driver. Unless …
26th April 2017
The International Monetary Fund’s latest assessment of Canadian growth prospects is unfortunately naïve. Although the economy expanded strongly at the start of this year, that was partly due to the housing bubble in Ontario and strong household …
21st April 2017
Falling gasoline price inflation led to a drop in the headline inflation rate to 1.6% in March, from 2.0%, and core inflation dipped further below the 2% mid-point of the Bank of Canada’s target range. The slowdown in unit labour costs growth over the …
The Bank of Canada confessed this week that speculation is partly responsible for the recent upswing in house prices, but doesn’t believe that higher interest rates are a solution to the problem. The negative impact on the real economy from higher …
13th April 2017
Although manufacturing sales values edged lower in February, the further gain in volumes and inventories suggest that production is gearing up for stronger export sales. This is a good sign that the long hoped for shift toward sustainable export-led …
The Bank of Canada’s decision today to keep its policy interest rate at 0.50% and to stay neutral on the outlook for rates is understandable given how uneven recent economic growth has been. Until there are clear signs of sustainable export-led growth, …
12th April 2017
Despite a further acceleration in Toronto, the national rate of annual house price inflation eased to 13.0% in March, down from 13.4%, reflecting the continued slowdown in Vancouver and falling house prices in several other smaller regions. … …
The uneven incoming data reinforce our view that the economy hasn’t turned the corner. Exports continue to misfire, which isn’t encouraging for hopes of a recovery in business investment. Meanwhile, households continue to do most of the heavy lifting. …
7th April 2017
The further gains in employment and hours worked in March are positive signs for growth in labour income. That supports our view that household spending contributed strongly to first-quarter GDP growth of 4.5% annualised. But with exports misfiring and …
We expect the Bank of Canada to hold interest rates at 0.50% next week and to remain neutral on the direction of interest rates in the near future. Despite economic slack and muted core inflation, economic growth has continued to surprise on the upside. …
5th April 2017
The 2.5% m/m drop in export volumes in February was widespread and suggests that the economy is still struggling with competitiveness challenges. This just goes to show that the Bank of Canada is right to still be cautious on the growth outlook. … …
4th April 2017
The latest Business Outlook Survey shows that, despite concerns about a potential slowdown in housing, businesses still expect faster economic growth this year. Nevertheless, pressures on production capacity are modest suggesting that core inflation will …
3rd April 2017
Financial markets appear to be ignoring the Bank of Canada’s latest warnings about the uncertain economic outlook and are pricing in an interest rate hike before the end of this year. In contrast, we think there are good reasons why monetary policy in …
31st March 2017
It’s tempting to conclude from the very strong 0.6% m/m gain in January GDP that the economy has turned the corner and that the Bank of Canada’s dovish take on the economy is out of tune with reality. But we aren’t ready to sound the all clear siren until …
After a long period of disappointment, the recent pick-up in global manufacturing activity points to a rebound in non-commodity export growth in the coming months. We think it would take a marked sustained improvement over several months, however, before …
30th March 2017
Economic growth has picked up recently, but we aren’t convinced the economy has turned the corner, particularly not when that growth is still so unbalanced. Non-commodity exports are lagging and business investment will decline further this year. …
29th March 2017
The recent run of positive economic data suggest that growth in first-quarter GDP could turn out to be as high as 3.0% annualised, stronger than the Bank of Canada’s forecast of 2.5%. The underlying growth drivers, however, still look skewed towards the …
24th March 2017
The small decline in the headline inflation rate to 2.0% in February, from 2.1%, was softer than expected, particularly considering higher gasoline price inflation. The bigger story though continues to be the low rate of core inflation. If history is any …
The 2017 Federal budget delivered today, which was largely a wait-and-see budget, is understandable given the highly uncertain outlook on US trade and fiscal policy. Furthermore, the government is also still waiting on the stimulus measures announced in …
22nd March 2017
Recent headline employment gains, mainly in full-time work, have been impressive. It turns out that most of the job creation over the past year have been in industries where hours worked are below-average, however, while jobs in industries with …
17th March 2017
The further 0.7% m/m increase in manufacturing sales volumes in January, partly driven by higher activity in the petroleum industry, provides further evidence that the economy maintained its momentum at the start of this quarter. That’s consistent with …
The annual rate of national house price inflation rose to a ten-year high of 13.4% in February, up from 13.0%, largely reflecting the continued acceleration in Toronto. The housing market conditions underpinning these large annual price gains, however, …
14th March 2017
Residential housing investment rebounded in the final quarter of last year and looks set to grow at an even faster pace this quarter, thanks to a surge in housing construction. While that will provide another boost to quarterly GDP growth, weakening …
10th March 2017
While employment rose by a moderate 15,300 in February, the bigger story was the massive 105,100 jump in full-time work, extending the run of better quality jobs lately. That adds to the evidence the economy has recovered from the oil shock. In addition, …
The rebound in merchandise export volumes in January, led by non-energy trade, is encouraging and broadly consistent with the recent pick-up in external business activity indicators. … International Merchandise Trade …
7th March 2017
The recent upturn in production activity and business confidence are encouraging signs for near-term growth prospects. There are still some big question marks, however. While first-quarter real GDP growth should prove satisfactory, we aren’t convinced …
3rd March 2017
More moderate GDP growth in the fourth quarter completed what proved to be a disappointing year of only 1.4% growth. Policymakers had hoped for a more spirited and sustainable export-led recovery. That plan still looks like a pipe dream, as lagging …
2nd March 2017
Although core inflation is dangerously low and wage growth anaemic, the Bank of Canada’s decision to hold its policy interest rate at 0.50% can be justified on the recent improvement in the activity data. But with non-energy exports still misfiring, …
1st March 2017
The recent slowdown in all three new core inflation measures suggest that the excess slack in the economy is building. The core CPI-common measure, which tracks the output gap most closely is of particular concern. The Bank of Canada expects …
28th February 2017
The potential changes to US trade balance statistics being considered by the US administration has raised eyebrows in Canada. But no matter how Trump’s administration wants to tweak the data, the US trade deficit with Canada is simply far too small to be …
24th February 2017
The headline inflation rate rose to 2.1% in January, up from 1.5%, largely because of higher gasoline inflation. While some of those gains will be reversed in February, the Bank of Canada will be much more focused on the weakness in core inflation. … …
We expect the Bank of Canada to hold its policy interest rate at 0.50% next week. Although core inflation and wage growth have slowed, activity and business confidence data have been more positive lately. Additional monetary stimulus later this year, …
22nd February 2017
Toronto’s growing housing bubble is being blamed on desperate first-time buyers chasing a dwindling inventory of homes for sale, but that’s a red herring. The truth is that it’s mainly being driven by move-up buyers leveraging the equity in their existing …
17th February 2017
The manufacturing sector ended last year in spectacular fashion, with sales volumes rising strongly for a second consecutive month in December. This strength is partly due to a rebound in the petroleum refinery industry, however, with export-orientated …
15th February 2017
The annual rate of national house price inflation rose to a ten year high of 13.0% in January, up from 12.3%, in large part due to the speculative housing boom in Toronto. That boom will continue to inflate price gains in the coming months. … …
14th February 2017
While the housing investment boom helped support the economy through the oil shock last year, the further deterioration in housing affordability will likely cost the economy in the longer run. The abrupt slowdown in Vancouver’s housing market serves as a …
10th February 2017
The impressive run of headline employment gains continued this year, with 48,300 jobs added in January, which is further evidence of a meaningful economic recovery in the second half of last year from the oil shock. (See Chart.) The next big challenge for …
December’s trade report confirmed that, even with the benefit of a weaker Canadian dollar, export volumes barely grew last year, which is further evidence of the structural competitiveness challenges. Rising US trade protectionism could make matters worse …
7th February 2017
