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The Bank of Canada's decision to hold rates unchanged at 0.75% last week will have convinced some that there isn't another rate cut in the pipeline. Nevertheless, we still think we could see another rate cut at the April meeting. … Additional interest …
6th March 2015
The jump in Canada's trade deficit to a two-and-a-half year high of $2.5bn in January, from $1.2bn, was principally due to a price-related 23% m/m drop in the value of crude oil exports. … International Trade & Building Permits …
The 2.4% annualised gain in fourth-quarter GDP looks encouraging enough, but this is merely the calm before the storm. … GDP (Q4 …
3rd March 2015
Bank of Canada Governor Stephen Poloz signalled last week that he thought the January interest rate cut was enough insurance against downside risks for the time being. That confirmed our existing view that a rate cut this week was unlikely. Nevertheless, …
27th February 2015
The decline in the headline CPI inflation rate to only 1.0% in January, from 1.5%, was entirely due gasoline prices, which fell by 26.9% over the past year. Excluding food, energy and other volatile items, core CPI inflation remained at 2.2% in January, a …
26th February 2015
This week we expect to learn on Thursday that headline CPI inflation fell to 1.0% in January, from 1.5%, principally because of the slump in energy prices last month. With crude oil and retail gasoline prices rebounding in February, however, headline …
20th February 2015
The 2.0% m/m fall in the value of retail sales in December suggests that Canadian consumers have taken flight, perhaps fearful for their jobs in the wake of the fallout from the energy price collapse. Admittedly, the unseasonably warm winter weather …
The Bank of Canada's recent focus on the dangers to the economy of low oil prices may well prompt it to cut interest rates again. At only 0.75% now, however, the scope for additional interest rate cuts is limited. If economic conditions become dire, the …
16th February 2015
December's stronger than expected gain in manufacturing sales suggests that GDP grew more strongly than we had assumed in that month. We now estimate that fourth-quarter GDP expanded by 2.4% annualised. … Survey of Manufacturing …
13th February 2015
The slump in oil prices has dramatically altered the outlook for economic growth and inflation. Following the Bank of Canada's surprise move last month to cut its policy rate to 0.75%, from 1.00%, futures markets now expect another quarter percentage …
12th February 2015
The Teranet-National Bank index shows that house price inflation slowed to 4.7% in January, from 4.9% in December, which reflects the recent softening in housing activity triggered by the slump in crude oil prices. House price inflation will slow further …
January's stronger than expected 35,400 gain in employment was driven entirely by a surge in part-time jobs. Accordingly, we wouldn't read too much into the small decline in the official jobless rate to 6.6%, from 6.7%. … Labour Force Survey …
6th February 2015
The trade deficit widened slightly to C$0.6bn in December, from C$0.3bn, but that increase was actually much smaller than expected. An encouraging rebound in export volumes more than offset the negative impact of lower oil prices on nominal exports. … …
5th February 2015
Lower mortgage rates won't prevent home sales and prices falling sharply in regions directly hit by the slump in oil prices. While they might support housing activity in other key markets, we fear that this will only fuel greater overvaluation, higher …
4th February 2015
The latest Survey of Financial Security reveals that household balance sheet risks have increased and the burden of that risk is concentrated among individuals in the 35 to 44 age bracket. Enamoured by low interest rates and rapidly rising house prices, …
2nd February 2015
November's weaker than expected 0.2% m/m decline in GDP suggests that the economy grew by no more than 2.0% annualised in Q4 last year. That's well below the Bank of Canada's estimate of 2.5%. Accordingly, the odds of another quarter percentage point rate …
30th January 2015
Softening economic conditions and speculation about another interest rate cut from the Bank of Canada will keep downward pressure on the Canadian dollar. Allowing for a modest bounce back in the price of oil, we expect the loonie to stay close to US$0.80 …
27th January 2015
The Bank of Canada's surprise quarter point rate cut to 0.75% last week, which came in response to the collapse in world oil prices, will only have a small positive impact on the economy. Unless oil prices rebound soon, further rate cuts are likely this …
26th January 2015
December's increase in core inflation, to 2.2% from 2.1%, reflects sector-specific factors and pass-through effects of a lower Canadian dollar already judged by the Bank of Canada as temporary. The Bank is far more concerned about the collapse in oil …
23rd January 2015
The Bank of Canada shocked markets this morning by lowering its policy interest rate from 1.00% to 0.75%, in response to the collapse in oil prices that now threatens the outlook for economic growth and inflation. Given the downside risks to that outlook, …
21st January 2015
Since oil now accounts for half of Canada's production-weighted commodity price index, the collapse in crude oil prices represents a big downside risk to the outlook for business operating profits. Unless oil prices rebound soon, profits could fall by as …
The larger than expected decline in November's manufacturing sales suggests that the economy lost some momentum in the final quarter of last year. We estimate the economy grew by close to 2.5% annualised, down from 2.8% in the third quarter. … Survey of …
20th January 2015
The bright side of the recent collapse in oil prices is the sinking Canadian dollar, which will encourage stronger US demand for cheaper Canadian goods and services. More generally, the collapse in oil prices should provide a further boost to US economic …
19th January 2015
Although the Teranet-National Bank measure shows house price inflation slowing slightly to 4.9% in December, from 5.2%, price gains are still outpacing growth in household incomes. The upshot is that the housing bubble is only getting worse. With the …
14th January 2015
As a large net oil exporter, the slump in the price of oil is a worrisome downside risk to Canada's economic outlook, which will be offset only partially by the sinking Canadian dollar. For the time being, we expect the Bank of Canada to stay neutral with …
The Bank of Canada's latest Business Outlook Survey results show that the collapse in oil prices has significantly undermined domestic business confidence and could well result in a near-stagnation in investment this year. … Collapse in oil prices point …
12th January 2015
The lower global crude oil prices fall, the bigger the negative impact will be for a net exporter like Canada. Alongside the severely overvalued housing market, the collapse in oil prices is a major downside risk to the Bank of Canada's view that economic …
The 4,300 decline in employment in December is a little disappointing, particularly as it follows a 10,700 fall the month before that. To some extent, however, the declines in the final two months of last year are pay back after the economy created a …
9th January 2015
With crude oil prices still in freefall, the deterioration in the monthly trade balance to a deficit of $0.6bn in November, from $0.3bn, is unfortunately only the start of what could develop into a much bigger shortfall. For a big net exporter of energy …
7th January 2015
October's stronger-than-expected GDP growth reflected more broad-based economic activity and has probably set the stage for stronger fourth-quarter annualised GDP growth than the 2.5% forecast by the Bank of Canada. But with the collapse in oil prices …
23rd December 2014
Household imbalances, an uneven export recovery and, more recently, the slump in oil prices are all downside risks to the economic and inflation outlook. That's three reasons for the Bank of Canada to extend its long pause in interest rates in 2015. …
22nd December 2014
The unexpected decline in the official core inflation rate to 2.1% in November, from 2.3%, supports the Bank of Canada's cautious neutral stance on the interest rate outlook. With the slump in oil prices now threatening Canadian oil producers and the …
19th December 2014
Even with the US economic recovery moving into a higher gear, the outlook for Canada's economy is, at best, mediocre. Furthermore, there is now a significant risk that a perfect storm of a collapse in oil prices and a sharp correction in the housing …
17th December 2014
The Bank of Canada admitted last week that the housing market has completely overshot and that the overvaluation is somewhere in the range of 10% to 30%. If we had to pick a number, it would be close to the high end of that wide range, reflecting our …
15th December 2014
The Teranet-National Bank measure shows that house price inflation was 5.2% in November, down slightly from 5.4%, easily outpacing growth in household incomes. Accordingly, this only adds to our concern about a housing bubble and a potentially severe …
12th December 2014
The slump in the crude oil prices to around US$60 per barrel is a serious threat to domestic business investment and future oil production. With the long-run breakeven cost of most oil sands projects in the US$60 to US$80 range, we fear that the longer …
The recent strength in residential building permits relative to housing starts indicate that the pace of home building may accelerate over the near-term. But that only adds to our concern of a potentially severe housing market bust in the longer-term. … …
8th December 2014
The weaker than expected 10,700 decline in employment in November and the uptick in the unemployment rate to 6.6%, from 6.5%, can be forgiven since it comes after extraordinarily strong job reports in the previous two months. The trend over the past six …
5th December 2014
The Bank of Canada's last policy statement for the year retained its neutral stance on the interest rate outlook. While acknowledging that inflation has been firmer than it expected, the statement stressed that this mainly reflects temporary factors. …
3rd December 2014
The pick-up in the official core inflation measure this year is partly due to one-off factors. Nevertheless, the Bank of Canada also pays close attention to alternative measures of underlying inflation, which are currently doing a better job of adjusting …
1st December 2014
Faster income growth and lower gasoline prices bode well for household spending prospects this holiday season. We expect somewhat faster consumption growth of 3.0%. … Faster household spending growth likely in …
The bigger than expected gain in the expenditure-based measure of Q3 GDP means that the Bank of Canada will have a harder time next week defending its neutral stance on the interest rate outlook. Nevertheless, we expect the Bank to maintain that stance, …
28th November 2014
The rise in core inflation further above target doesn't change the interest rate outlook, since that increase mainly reflects the temporary effects of a weaker currency, which the Bank believes will fade after next year. With material excess slack in the …
26th November 2014
September's stronger than expected 0.8% m/m gain in retail sales validates the recent strength in employment growth in suggesting that the economy ended the third quarter on a reasonably solid footing. This supports our above-consensus estimate that the …
25th November 2014
The Bank of Canada's revamped monetary conditions index signals that financial conditions looser than they have been for most of the past 15 years. Normally GDP growth would be expected to accelerate in response to that financial stimulus. A loosening of …
24th November 2014
The stronger than expected 2.3% core inflation reading in October won't change the Bank of Canada's mind that ultra low interest rates are needed to tackle the weakness in the real economy that would, in the longer-term, push inflation back below target. …
21st November 2014
The recent decline in the value of the Canadian dollar will provide a much-needed boost to domestic tourism. That support, aided by a steadily improving US economy, could add as much as 0.5 percentage points to GDP growth in 2015. … Cheaper loonie will …
18th November 2014
We suspect that the jobs bonanza over the past two months does not signal an upturn in the economy. The impressive 117,200 positions created in September and October was the strongest two-month showing in over two years. It is close to two-thirds of the …
17th November 2014
Amidst challenging economic times, the Conservative-led government has fulfilled its pledge to eliminate the Federal budget deficit and is now focused on fortifying its majority government in next year's election with some pre-election tax cuts and …
12th November 2014
The Teranet-National Bank measure shows that house price inflation held at 5.4% in October, where it is likely to remain for the rest of this year. Nevertheless, the regional breakdown continues to reveal some troubling decoupling that leaves us fearful …
