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The merchandise trade deficit narrowed by a smaller margin than expected in April, mostly due to a tepid rebound in export volumes. Given the potential for a decline in energy exports in May, it now looks like exports were a big drag on the economy in the …
3rd June 2016
The pick-up in GDP growth in the first quarter might convince some that the worst effects of the oil price shock are over, but the details showed that business investment fell further, consistent with weaker intentions for this year. With the economy …
31st May 2016
After a strong start to the year, the economy likely ended the first quarter badly and we now believe that it shrank significantly this quarter, partly because of significant disruptions to oil production caused by severe wildfires in Alberta. More …
27th May 2016
Despite a serious downgrade to its views on second quarter economic activity, the Bank of Canada opted to hold interest rates at 0.50% today and to remain neutral on the rate outlook, clinging to its hope that growth will rebound in the second half of the …
25th May 2016
The rise in the core inflation rate in April, to 2.2% from 2.1%, was slightly stronger than expected but still appears due to the past depreciation of the Canadian dollar. As the weakness in the economy takes over as the primary driver of inflation later …
20th May 2016
We expect the Bank of Canada to hold interest rates at 0.50% next week and maintain a neutral outlook for future policy changes. Despite stronger economic growth at the start of the year and the rebound in oil prices, forward looking indicators on …
18th May 2016
The dangerous wildfires that broke out in Alberta earlier this month haven’t changed the dismal outlook for economic growth this year. As the increasing amount of survey evidence indicates, the much bigger and more lasting problem is the ongoing weakness …
13th May 2016
The modest decline of 2,100 in employment in suggests that the economy is still struggling to cope with lower oil prices. The unemployment rate was unchanged at 7.1%. We still believe that the worst isn’t over and expect the Bank of Canada eventually to …
6th May 2016
Despite a 25% m/m rebound in crude oil prices, the much larger than expected merchandise trade deficit in March suggests that the underlying momentum in the economy was weaker than widely assumed. This supports our view that GPD growth will be a meagre …
4th May 2016
Although the economy likely grew strongly in the first quarter, beneath the surface we aren’t convinced that the economy is still struggling to adjust to lower energy prices, despite the weaker exchange rate. Growth in the tradable sectors isn’t …
29th April 2016
Although incoming data indicate that first-quarter GDP grew by as much as 2.8% annualised, we doubt this marks the beginning of an upturn in economic growth prospects. Economic growth in that quarter was boosted by a surge in energy exports, even as the …
26th April 2016
Canada’s economy certainly has its growth challenges ahead, but the recent rally in the Canadian dollar isn’t a major threat to the economic growth outlook, partly because it has been accompanied by a rebound in oil prices, which is a positive. …
22nd April 2016
The rise in the core inflation rate in March, to 2.1% from 1.9%, was stronger than expected but appears mainly due to the past depreciation of the Canadian dollar. As the weakness in the economy takes over as the primary driver of inflation later this …
Even after allowing for the sharp decline in the value of petroleum sales, the 3.3% m/m drop in manufacturing sales in February was twice as large as expected, with the drop in sales volumes hinting that industrial production weighed heavily on GDP …
15th April 2016
The strength of recent monthly GDP data has prompted some forecasters to revise up their growth forecasts for this year as a whole. But predictions of an acceleration in growth are, to our minds at least, at odds with the broader evidence. The economic …
The Bank of Canada’s decision to hold interest rates at 0.50% and to remain neutral on the rate outlook was largely in response to the improvement in economic growth early this year, fiscal stimulus measures and the rebound in oil prices. We still think …
13th April 2016
Despite glimmers of a revival in production, the mood among businesses across most sectors and regions has darkened due to shrinking real incomes and weak domestic demand, with the low level of confidence more consistent with a shrinking economy. This …
8th April 2016
Despite February’s decline in export volumes, earlier gains mean that exports in Q1 asa whole grew quite strongly, easily outpacing imports. Net exports likely contributedas much as 3 percentage points to GDP growth. While domestic demand probablyremained …
7th April 2016
We expect the Bank of Canada to keep interest rates at 0.50% next week and maintain a neutral outlook for future policy changes. Despite the strong start to the year, policymakers indicated recently that they believe the economy isn’t out of the woods …
6th April 2016
The Bank of Canada's first-quarter survey on business intentions suggests that the worst might be over for Canada’s struggling economy, but we don’t anticipate any significant improvement this year. Indeed, we suspect that the economy will lose momentum, …
1st April 2016
Despite the recent resurgence in economic growth, we still expect the Bank of Canada to cut interest rates again, albeit not until much later this year. While widening interest rate differentials between Canada and the US would normally push the Canadian …
The 0.6% m/m increase in January GDP, which was double the 0.3% m/m consensus estimate, was a very welcome surprise, particularly as the gain was so broad-based. We are not convinced the stronger tone over the past few months will be sustained, however …
31st March 2016
The Liberal government’s budget plan to lift the economy over the next two years with close to C$12bn in infrastructure funding will be a tall task, one that we would not count on to produce much benefit in terms of additional economic growth. Other …
24th March 2016
The 2016 Federal budget delivered today provides only a modest fiscal stimulus response to the flagging economy. Despite the more dismal GDP growth outlook this year, policymakers weren’t comfortable providing much more fiscal stimulus beyond what was …
22nd March 2016
The recent rally in the Canadian dollar, which has been driven by rising oil prices and downgrades to the outlook for US interest rates, is unlikely to last beyond the middle of this year. Admittedly, we are forecasting a further small rise in oil prices …
18th March 2016
The much stronger than expected increase in manufacturing sales volumes in January is an encouraging start to the year, with the details reflecting stronger external demand and some resilience in domestic demand. Accordingly, the risks around our …
16th March 2016
The housing boom has been a key support to the economy over the past few years, but its end is in sight. While media headlines focus on the continuing booms in Toronto and Vancouver, the fallout in energy-producing regions may result in an even more …
11th March 2016
The weaker than expected 2,300 decline in employment in February and further uptick in the unemployment rate to a three-year high of 7.3% from 7.2%, provides more evidence that the economy is struggling to cope with the oil price shock. As the fallout …
The Bank of Canada’s decision to hold its key policy rate at 0.50% today doesn’t mean that further rate cuts are off the table, as it depends on the details of the forthcoming Federal stimulus budget due later this month. If that budget doesn’t rejuvenate …
9th March 2016
The hysterical response to the news that the Federal budget deficit might increase to as much as $30bn next year left us shaking our heads in dismay. Canadian economists are still stuck in the Paul Martin inspired 1990s mind-set that any deficit is a …
4th March 2016
Despite the modest rise in the monthly trade deficit to $0.7bn in January, from $0.6bn, the big 3.6% m/m surge in export volumes is good news. The balance of risks to our forecast that first-quarter GDP growth will be 1.0% annualised now lie on the …
The Bank of Canada is unlikely to cut interest rates at the upcoming policy meeting on 9th March. But we still anticipate that the ongoing economic slump, triggered by the collapse in commodity prices, will force it to lower its key policy rate to only …
2nd March 2016
It underlines how bad things have become in Canada that the 0.8% annualised increase in fourth-quarter GDP, above the consensus forecast for no change, will be celebrated as some sort of economic renaissance. For 2015 as a whole, GDP increased by only …
1st March 2016
The rebound in headline inflation in January back to the mid-point of the Bank of Canada’s 1% to 3% target range illustrates that the markedly weaker Canadian dollar isn’t all good news. Strong goods price inflation is restraining real income growth and …
26th February 2016
Our analysis suggests that the weakness of Canadian manufacturing output is partly due to the knock-on drag from the collapse in the mining sector. In addition, however, Canadian manufacturers are struggling to compete successfully with Mexican producers …
19th February 2016
Consumer prices increased by 0.2% m/m seasonally adjusted in January, as a sharp 0.6% m/m jump in food prices offset the gasoline-related 0.8% m/m decline in transportation prices. Added to some unfavourable base effects, that was enough to push the …
The 1.3% m/m increase in manufacturing sales volumes in December is encouraging, but the broader picture is still that, despite a 30% depreciation in the Canadian dollar over the past four years, manufacturing sales volumes have barely risen at all. … …
16th February 2016
With the economy reeling from the collapse in oil prices, the rapid deterioration in global financial conditions couldn’t have come at a worse time. The balance of risks to our forecast that GDP growth will be 0.7% this year now lie to the downside. … …
12th February 2016
House price inflation slowed to 5.9% in January, from 6.2%, and the existing home-sales-to-listings ratio indicates that the pace of inflation will ease further in the coming months. … Teranet-National Bank House Prices …
Nothing illustrates the regional divergence in Canada’s economy like housing. While house prices continue to surge in the already most over-valued markets in Vancouver and Toronto, Calgary and other areas most affected by the collapse in commodity prices …
10th February 2016
While negative interest rate policies are being adopted by some major central banks, economic growth and inflation in Canada will be buffered by fiscal policy stimulus and the past depreciation of the Canadian dollar. Accordingly, we don’t foresee the …
5th February 2016
The weaker than expected 5,700 decline in employment in January, was a poor start to the year and provides more evidence that the economy is struggling to cope with the collapse in oil prices. The unemployment rate rose to 7.2%, from 7.1%, and we expect …
The sharp drop in oil prices and the Canadian dollar have led to a rapid deterioration in Canada’s economic outlook, overwhelming the ability of policymakers to stabilise the economy with conventional stimulus. We expect GDP growth to be less than 1% in …
3rd February 2016
The sinking Canadian dollar has prevented the annual core CPI inflation rate from falling below the mid-point of the Bank of Canada 1% to 3% inflation target range, despite the worsening economic downturn and growing slack in the economy. But tentative …
29th January 2016
After stagnating in October, the economy grew by 0.3% m/m in November, albeit partly on account of what we believe was a very short-lived rebound in oil production. As things stand now, we estimate that GDP was stagnant in the fourth quarter. … GDP by …
Despite a rapidly deteriorating outlook, the Bank of Canada defended its recent inaction on interest rates on the basis of it not knowing the details of the upcoming Federal budget, due to be delivered sometime in April. But if that budget fails to admit …
22nd January 2016
Despite lower energy prices, the annual headline inflation rate climbed to 1.6% in December, from 1.4%, as the massive decline in the Canadian dollar continues to boost some prices. Core inflation fell slightly to 1.9%, from 2.0%, but that decline was …
The Bank of Canada’s decision to hold its key policy rate at 0.50% today doesn’t mean that further rate cuts are off the table entirely. The Bank sounded far more downbeat about the economic outlook because of the worsening commodity price shock. But …
20th January 2016
Although the rebound in manufacturing sales in November was stronger than most expected, it wasn’t enough to offset similar declines in the previous three months. Accordingly, manufacturing activity apparently declined quite sharply in the fourth quarter …
The plunge in the Canadian dollar to a thirteen-year low of US$0.69 has forecasters jumping on the bearish bandwagon with increasingly pessimistic forecasts for the year ahead, mainly over fears that the global economy is in a meltdown. We think this is …
15th January 2016
