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We expect the Bank of Canada to hold its policy rate at 0.50% next week and retain its neutral stance on the rate outlook. The incoming data indicate that third-quarter GDP growth was stronger than the Bank initially expected. But the uncertain global …
14th October 2015
The Bank of Canada's third-quarter Business Outlook Survey showed that more businesses are betting on an improving US economy and a cheaper loonie to lift Canada’s economy out of its oil induced slump. We think the Bank of Canada will take this optimism …
9th October 2015
The Trans-Pacific Partnership (TPP) trade agreement, even if it was ratified soon, would be unlikely to improve Canada’s near-term economic prospects. The initial effects of the new trade agreement may even be negative, while the benefits are realised …
The labour market continued to withstand the oil shock in September, churning out a moderate gain of 12,100 jobs. This wasn’t enough, however, to prevent an increase in the unemployment rate to 7.1%, from 7.0%. Nevertheless, the resilience of the labour …
While the sharp decline in export volumes in August was disappointing, the big gains in earlier months mean that net trade still contributed positively to third-quarter GDP, which we now estimate grew by 2.5% annualised. That is well above the Bank of …
6th October 2015
Market commentators and policymakers are optimistic that the latest monthly GDP data are a sign that the economy has turned the corner and that better times lie ahead. The details, however, reveal that this optimism is misplaced. Mining sector volatility …
2nd October 2015
The stronger than expected showing in July’s GDP, which reflects volatility in oil sands output, suggests that the risks to the Bank of Canada’s Q3 GDP growth forecast of 1.5% annualised lie to the upside. But the increasingly uncertain global outlook …
30th September 2015
The recent speech by Bank of Canada Governor Stephen Poloz on commodity prices and Canada’s economy attempted, albeit unconvincingly, to play down the significance of the slump in commodity prices to the economic outlook. We think Canada’s struggling …
25th September 2015
The modest 0.2% m/m gain in retail sales volumes in July, together with the slight downward revised figures for June, suggest that the pace of consumer spending growth slowed in the third quarter. This adds to our concern that the economy’s rebound from …
23rd September 2015
Although the majority of forecasters have downgraded their forecasts substantially for GDP growth this year, most remain overly optimistic about the underlying strength in the economy. The economy will be lucky to grow by 1.0% this year, and we think …
18th September 2015
The unchanged 1.3% annual headline inflation rate in August and the drop in core inflation to 2.1%, from 2.4%, are in line with the Bank of Canada’s assumptions, so they won’t change its neutral view on the outlook for rates. The odds of it lowering rates …
Despite the rebound in sales volumes over the summer, Canada’s export-orientated manufacturing sector has struggled repeatedly to sustain any gains in over the past two years or so. Even though US manufacturing output is close to its pre-recession level, …
17th September 2015
The rate of house price inflation rose to 5.4% in August and the elevated sales-to-new listings ratio indicates that it will accelerate to 6.0% before year end. The national average continues to be driven by strong gains in Vancouver and Toronto, whereas …
14th September 2015
The Bank of Canada’s decision to leave its key policy rate unchanged at 0.5% last week was largely as expected in light of the recent news that the real economy returned to growth in June. Nevertheless, we expect GDP growth to be pretty underwhelming in …
11th September 2015
The Bank of Canada’s decision to leave its key policy rate unchanged at 0.50% today was largely as expected given that the economy apparently returned to positive growth in June. But we still anticipate that further weakness in energy-related business …
9th September 2015
The widely talked about 0.5% m/m gain in June’s GDP doesn’t convince us that the economy is on the path to recovery. Close examination of the data reveals that nearly half of this growth was due to unusual volatility in the oil & gas sector. Meanwhile, …
4th September 2015
August's employment gain of 12,000 was better than most had expected, thanks mainly to a hiring spree in the public sector. This is more evidence supporting our view that the economy likely returned to positive growth in the third quarter. … Labour Force …
We expect the Bank of Canada to hold rates at 0.50% at next week’s policy meeting and provide few indications that additional cuts will be needed this year. Nevertheless, we still think that a third rate cut will arrive before year-end if, as we expect, …
3rd September 2015
The narrowing of the trade deficit in July indicates that the economy began the third quarter on a solid footing. This supports our view that, after suffering a mild recession in the first half of the year, the economy has returned to positive growth. …
The 0.5% annualised decline in second-quarter GDP, following a downward revised contraction in the first quarter, confirmed that the economy slipped into a technical recession in the first half of this year. With exports still struggling and business …
1st September 2015
Further declines in commodity prices, droughts and weaker business confidence indicate that the economy is struggling to escape the mild recession that began in the first half of the year. We still expect the economy to return to positive growth in the …
28th August 2015
The turmoil in global financial markets, particularly the renewed weakness in commodity prices, is more bad news for Canada’s struggling economy. The timing of the Federal election in October may complicate matters, but there is now a good chance that the …
24th August 2015
Markets still appear to be speculating on further declines in the Canadian dollar versus the US dollar but, after a 20% decline over the past 12 months, we believe that there is little scope for any additional weakness. Admittedly, oil prices could fall …
21st August 2015
Although July's annual core inflation rate nudged up to 2.4% from 2.3%, the Bank of Canada likely couldn't care less. With the economy in a mild recession and falling oil and other industrial commodity prices threatening a more serious downturn, the …
Since oil prices first began to fall last year, Canada’s economic performance has gone from mediocre to dismal, culminating in a mild recession in the first half of this year. With oil prices tumbling again and the export-orientated manufacturing sector …
19th August 2015
Although the economy might only be suffering the mildest of recessions, the bigger and far more important point often lost in the debate is that the economy is clearly underperforming its growth potential by a very wide margin. Unfortunately, with oil …
17th August 2015
June's smaller than expected rebound in manufacturing sales values, which was even weaker in volumes terms, provides more evidence that the non-energy economy is struggling to lift the economy out of its oil-induced recession. … Survey of Manufacturing …
14th August 2015
Although the rate of house price inflation remained at 5.1% in July, the recent rebound in the home sales-to-new listings ratio indicates that it may yet accelerate to 6.0%. This mainly the strength of the markets in Vancouver and Toronto, whereas most …
12th August 2015
The latest housing start figures don't fully reflect the relatively stronger pace of building permits, an indication that home building may accelerate further in the near-term, even as signs point to a growing oversupply problem. Nevertheless, we still …
11th August 2015
The Conservative campaign pledge to introduce a new home renovation tax credit if elected this autumn is possibly more misguided than the NDP and Liberal pledges to raise taxes during a recession. With renovation investment and household debt at record …
10th August 2015
Employment increased by 6,600 in July, more evidence that the recent declines in output haven't been severe enough to induce employers to slash jobs. For the time being that's comforting. But if the current economic slump persists for too much longer, …
7th August 2015
The surprisingly large narrowing in June's trade deficit was driven by a rebound in export volumes and is a positive sign for the economy. Considering the mixed performance of exports lately, however, it remains to be seen whether the export sector can …
5th August 2015
A housing shortage has been determined by the housing industry as the key explanation for record high house prices. While this interpretation appears to have caught on in certain circles, the broader facts indicate that it is a myth. The same forces that …
3rd August 2015
May's GDP contracted by 0.2% m/m, the fifth consecutive monthly decline, thereby providing more evidence that the economy slipped into a recession in the first half of the year. With oil prices slumping again and energy producers announcing additional job …
31st July 2015
The Vancouver and Toronto housing markets appear to be enjoying a revival of late, in contrast to most other markets in Canada. But with labour market conditions set to deteriorate this year and market bond yields expected to climb over the longer-term, …
28th July 2015
While the steady job gains from the household employment survey are often highlighted as a sign that the oil-induced recession in the first half of the year was an unusually mild one, closer examination of actual payroll data reveal that job prospects …
27th July 2015
The 0.4% m/m increase in retail sales volumes in May, offsetting a similar decline the month before, suggests that most Canadian consumers remain confident about job prospects. But that could all change very quickly as the fallout in business investment …
23rd July 2015
The slump in oil prices has already pushed the Canadian economy into a mild recession and things could yet go from bad to worse. Falling energy investment will hit both production and jobs, which will further depress incomes and spending. Meanwhile, …
22nd July 2015
The latest renewed slump in world and domestic crude oil prices is another blow to the outlook for Canada's oil-dependent economy, which has already slipped into a mild recession. With the fallout from the first oil price shock not yet over and signs of a …
20th July 2015
The puzzling weakness in non-energy exports most likely boils down to a lack of competitiveness, even after taking into account the recent depreciation of the Canadian dollar. Unless the value of the loonie falls considerably further, which we doubt, we …
The slightly bigger than expected 0.3% m/m increase in core consumer prices in June doesn't materially reduce the odds of an additional rate cut by the Bank of Canada later this year. Core inflation is still broadly in line with the Bank's latest …
17th July 2015
The continued weakness in manufacturing sales volumes in May is further evidence that the non-energy economy is very unlikely to pull the economy out of its oil-induced slump anytime soon. Accordingly, this supports the case for the Bank of Canada to cut …
15th July 2015
As we expected, the Bank of Canada lowered its key policy rate from 0.75% to 0.50% today, admitting that the economy fell into a mild recession in the first half of the year. We have been warning that the oil downturn would hit the economy harder than the …
The rate of house price inflation rose to 5.1% in June, from 4.6% in May, and the recent rebound in the home sales-to-new listings ratio indicates that it may accelerate to 6.0% soon. The pick-up reflects big gains in Toronto and Vancouver, while most …
14th July 2015
The 2015 investment intentions survey suggests that real private and public investment will fall more sharply than most people realise this year. This is the strongest indication so far that, what might seem like only the mildest of recessions now, is in …
13th July 2015
June's modest 6,400 drop back in employment, which follows the surprisingly strong 58,900 increase in May, should help to quell fears that the economy is tanking. Even so, with the much weaker activity data suggesting that the economy is seemingly in …
10th July 2015
Facing a larger than previously expected fallout from the oil price shock and a still misfiring manufacturing sector, there is a very strong chance that the Bank of Canada will cut rates from 0.75% to 0.50% at next week's policy meeting. An additional cut …
8th July 2015
The unexpected widening of the trade deficit in May is further evidence that, after contracting in the first quarter, the economy probably shrank further in the second quarter. In other words, Canada is in recession. This is why we expect the Bank of …
7th July 2015
The Bank of Canada's latest Business Outlook Survey shows that not only is the fallout from the slump in oil prices still taking a heavy toll on the economy, but the pick-up in non-energy sectors remains underwhelming too. This suggests that, after an …
6th July 2015
With the fallout from the oil price slump still taking its toll on the economy and manufacturing hobbling along, growth prospects look only marginally better now than at the start of the year. For the economy to have any hope of coming close to the Bank …
