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The unexpected decline in housing starts in October, which was driven by a sharp drop in the volatile multi-unit segment, is likely to be reversed in the coming months, reigniting concerns about overbuilding in the large hi-rise condominium market. …
11th November 2014
Although the level of GDP over the past three and a half years has been revised noticeably higher, the more recent growth rates of GDP were left largely unchanged. Moreover, the expenditure breakdown shows that energy-related business investment played a …
10th November 2014
The stronger than expected employment gain of 43,100 in October, following a massive 74,100 rise in September, is the most encouraging sign yet that the economy may have shifted into a higher gear. Nevertheless, we suspect that the Bank of Canada will …
7th November 2014
September's encouraging trade report confirmed that the recovering export sector provided a solid positive contribution of around one percentage point to third-quarter GDP growth, which we estimate was 2.0% annualised. … International Merchandise Trade …
4th November 2014
Indicators show that labour market conditions have deteriorated over the past year or so. The actual amount of slack in the labour market, though, appears to be less than we previously thought. But with lower commodity prices adding to the risks to the …
3rd November 2014
The decline in GDP for August, after the near-stagnation in July, suggests that third-quarter GDP growth may have fallen short of the economy's potential growth rate of 2.0% annualised. … GDP by Industry …
31st October 2014
Alongside the potential for a sharp correction in the domestic housing market, the recent slump in crude oil prices represents a second risk to the Canadian economic outlook. We expect GDP growth to slow from 2.2% this year to 2.0% in 2015 and only 1.5% …
27th October 2014
The recent run of weak data confirms that the economy fared even worse in August after barely growing in July. Encouragingly, leading indicators point to a spectacular rebound in September, though it's early in the data cycle. In short, we wouldn't plan …
The Bank of Canada's decision to drop its neutral forward guidance reflects a change in its policy communications approach and not the interest rate outlook. With less explicit forward guidance to go by in the future, market inferences about the policy …
22nd October 2014
The small decline in August retail sales volumes, combined with the meagre gain in wholesale sales reported earlier this week, supports our view that the economy lost some momentum in the third quarter. Overall, the Bank of Canada's third-quarter GDP …
The further slide in world crude oil prices has prompted speculation that Canada's booming energy sector may soon swing into reverse, dragging the economy under with it. But even if oil prices remain at current levels, that would still leave them above …
20th October 2014
Recent market events, most notably the slump in world oil prices, will keep core inflation in Canada well within the policy target range over the coming months. Accordingly, we expect the Bank of Canada to remain very much neutral with regard to the …
17th October 2014
The large drop in manufacturing sales volumes in August supports our more conservative view that the economy continued to struggle in that month. If anything, the risks to our below-consensus estimate that third-quarter GDP growth was only 2.4% annualised …
16th October 2014
At next week's policy meeting we expect the Bank of Canada to remain neutral on the direction and timing of the next move in its policy rate. Although core inflation has rebounded sooner than the Bank had expected, recent data support its view that this …
15th October 2014
Canada's position as a large energy net exporter obviously means that it is exposed to any slump in world oil prices. Should the recent slump in oil prices persist, then that would certainly leave its mark on aggregate national income. But we doubt that …
13th October 2014
While the Bank of Canada's latest Business Outlook Survey results point to an improvement in the outlook for sales growth, firms still aren't confident enough in that outlook to boost investment beyond simply replacing existing capital equipment that has …
10th October 2014
The stronger than expected 74,100 increase in employment in September, which pushed the unemployment rate down to 6.8%, from 7.0%, suggests that the economy might finally be catching fire. One month of data, however, doesn't make a trend. The Bank of …
The recent decline in crude oil prices won't affect the immediate outlook for oil & gas production but, if sustained, lower oil prices could curb investment in Canada's oil sands, particularly as domestic production has a relatively high marginal cost. …
7th October 2014
Housing bubble fears have prompted some commentators to suggest that the Bank of Canada should hike interest rates before it's too late. But since the Bank doesn't typically target asset price inflation and, even if it did, doesn't even believe there is a …
6th October 2014
Canada's roller-coaster export performance continued in August, with exports tumbling after strong gains in the previous months. Even so, the export recovery still looks broadly intact. Indeed, a solid contribution from net exports should support our …
3rd October 2014
Canada's weaker than expected GDP data for July suggest that third-quarter GDP growth might turn out to be slightly weaker than our below-consensus forecast of 2.4% annualised, following the weather-related bounce-back of 3.1% in the second. This supports …
30th September 2014
July's flat retail sales volumes combined with the decline in wholesale sales reported last week indicate that the economic recovery lost some momentum at the start of the third quarter. This is broadly consistent with our below-consensus third-quarter …
23rd September 2014
After a slow start to the year, partly due to bad weather, the recent run of good data since then indicate that the economy continued to grow well above its potential annualised growth rate of 2.0% in the third quarter. We now expect the economy to grow …
22nd September 2014
The unexpected rise in the official core inflation rate, mainly due to recent price hikes in household communications, doesn't appear to reflect any tightening in domestic economic conditions and therefore won't change the Bank of Canada's neutral …
Governor Stephen Poloz's reminder today that the Bank of Canada has no desire to use monetary policy to target a weaker currency doesn't mean that the Canadian dollar won't continue to depreciate over the next year or two. … Bank of Canada isn't targeting …
16th September 2014
The continued strength in manufacturing sales in July, combined with some upward revisions to the gains in the months before, suggests that the economy began the third quarter on a stronger footing than we had previously assumed. Accordingly, the risks to …
In his first 100 days in office, Egypt’s President al- Sisi has made more progress in tackling the country’s economic problems than many, including ourselves, had expected. In particular, his government has cut subsidies and also started to address the …
12th September 2014
The Teranet-National Bank national composite house price index showed that house price inflation rose to 5.0% in August, up slightly from 4.9% in July. Nevertheless, the sales-to-listings ratio suggests that house price inflation will slow before the end …
Housing starts have been running at close to 190,000 units over the past year, well above demographic demand, which we estimate is somewhere in the range of 175,000 to 185,000 units. Meanwhile, newly completed unoccupied inventories remain high (see …
9th September 2014
While the recent surge in new motor vehicle sales is an encouraging sign of household confidence perhaps, we think it is more likely a weather-related bounce back from the slowdown earlier this year. More importantly, with motor vehicle imports higher and …
8th September 2014
Canada's discouraging employment performance over the past six months is further evidence that the economy is struggling and that the Bank of Canada's needs to keep interest rates low to have any hope of achieving its medium-term inflation objective. … …
5th September 2014
The further growth in export volumes in July is encouraging, but we're still not convinced this strength will be sustained. Nevertheless, with imports increasing at a more moderate pace, the improvement in the trade surplus bodes well for third-quarter …
4th September 2014
The Bank of Canada's neutral policy statement on the rate outlook showed that it isn't concerned about the recent uptick in inflation, since this is due to temporary factors rather than any improvements in domestic economic fundamentals. Although it …
3rd September 2014
Although some evidence suggests that hourly wages may have risen more quickly recently, labour productivity has also risen as well, resulting in smaller increases in unit labour costs, or slower wage cost inflation. Since this measure of wage cost …
1st September 2014
After slowing more than previously thought in Q1, Canada's economy rebounded more strongly than expected in Q2, posting annualised GDP growth of 3.1%. The 17.8% rebound in exports mainly reflects the bad weather that hit exports earlier this year, as well …
29th August 2014
We expect the Bank of Canada to retain its neutral interest rate bias in next week's policy statement. Although exports have rebounded surprisingly well, the Bank's Governor doesn't seem convinced that a lasting export revival is underway, not least …
27th August 2014
The slowdown in the growth of business profits in the second quarter runs counter to the consensus view that stronger overall economic growth lies just around the corner. This supports our view that economic growth in the second half of the year will be …
26th August 2014
Canada's economic rebound in the second quarter mainly reflects a bounce-back after bad winter weather dampened economic activity in the first quarter of this year and certain one-off factors that boosted agricultural and auto exports. As these temporary …
25th August 2014
The unexpected decline in core inflation in July, to 1.7% from 1.8% in June, probably marks a turning point for the second half of this year. With labour market conditions likely to become even more challenging due to the prospect of slow economic growth, …
22nd August 2014
Even after the upward revisions to July's data, the weak trend in employment suggests that some caution should be taken when making any bold inferences about the state of the economy, particularly when GDP figures have been bolstered by large increases in …
19th August 2014
The Teranet-National Bank national composite house price index showed that house price inflation accelerated somewhat to 4.9% in July, from 4.4% in June. The sales-to-listings ratio suggests that house price inflation will fall to 4.0% in the second half …
13th August 2014
Canada's labour market continued to misfire in July. We can't help thinking that if the Bank of Canada had a dual inflation/employment mandate like the Fed, then it would now be seriously considering whether a cut in interest rates is needed. … Labour …
8th August 2014
The monthly external trade balance unexpectedly improved to a surplus of $1.9bn in June, which is the best showing in more than two years. To the extent that the improvement reflects stronger growth in exports, this is good news for the Bank of Canada, …
6th August 2014
May's consensus-matching 0.4% m/m increase in GDP suggests that second-quarter GDP growth will turn out to be close to 2.5% annualised, following the weather-related slowdown to 1.2% in the first. Since the Bank of Canada has already taken this rebound …
31st July 2014
The recent pick-up in inflation has led some people to question the Bank of Canada's neutral stance on interest rates, but we think these concerns are misplaced. The recent increase in headline inflation largely reflects higher energy and food price …
28th July 2014
May's respectable increase in retail sales volumes combined with the stronger gains in wholesale and manufacturing sales reported last week indicate that the economy regained some lost momentum in that month. This is broadly consistent with our …
23rd July 2014
The fact that Canada's unemployment rate has only nudged higher in the past few months is astonishing, given the recent weakness in net employment gains. The only reason why the unemployment rate hasn't risen is that people have been exiting the labour …
22nd July 2014
Canadian labour market conditions appear to have deteriorated over the past year and a half, even though the unemployment rate has been unchanged. While net employment gains have been unusually weak lately, the unemployment rate hasn't risen because …
21st July 2014
The further rise in headline inflation in June, which is largely due to higher food prices, is unlikely to worry the Bank of Canada. Although most measures of underlying inflation also nudged higher, this largely reflects exchange rate pass-through …
18th July 2014
Canada's economy will struggle over the next two years due to a housing-induced slowdown that potentially could push the economy close to stagnation before the end of 2016. While export and investment growth should improve somewhat, this won't be enough …
16th July 2014
