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We anticipate that the Bank of Canada will retain its neutral bias on rates in next week's policy statement, although some dovish tweaks might surprise markets. Economic growth remains unbalanced, thwarted by weak exports and housing imbalances. …
9th April 2014
The recent slowdown in housing starts is just the beginning of a long-term correction that will dampen economic growth this year and next. If, as we expect, new home sales soften further, in response to tighter credit conditions and softening investor …
8th April 2014
The modest improvement evident in the Bank of Canada's spring Business Outlook Survey is an encouraging sign, but doubts remain about the near-term outlook for exports and softening domestic demand. Accordingly, we doubt that this slight increase in …
7th April 2014
The recent acceleration in wage inflation is an encouraging sign, especially considering the excess slack in labour markets and still uncertain economic outlook. For these and other reasons, however, there is limited upside potential to wage growth this …
Employment increased by a robust 42,900 in March, driving the unemployment rate down to a four-month low of 6.9%, from 7.0%. Unfortunately, the bulk of the net jobs created last month were apparently part-time positions taken up by youths. … Labour Force …
4th April 2014
February's merchandise trade report, which revealed only a partial rebound in export volumes, can be partly blamed on bad weather. Nevertheless it still seems that Canada's economy isn't benefitting fully from the steadily improving US economy. … …
3rd April 2014
The stronger than expected 0.5% m/m rebound in January's GDP, which fully reversed December's weather-related contraction, suggests that bad weather had a smaller effect on first-quarter activity than previously thought. Accordingly, the risks to our GDP …
31st March 2014
The decision by Canada's large banks to cut fixed mortgage rates ahead of the typically busy Spring home buying season won't boost sagging home sales. With housing so unaffordable, mortgage rates already incredibly low and mortgage lending rules tighter, …
In his speech last week, Bank of Canada Governor Stephen Poloz argued that the legacy of the financial crisis and demographic changes can explain Canada's recent lacklustre economic performance. More importantly, the latter also implies that future trend …
24th March 2014
The decline in annual headline inflation to 1.1% in February, from 1.5%, won't concern the Bank of Canada as it mainly reflects base-year effects in transportation and clothing. Meanwhile, the strong rebound in retail sales volumes in January, following …
21st March 2014
Pauline Marois, leader of the separatist Parti Quebecois (PQ), has suggested that an independent Quebec could hold a seat on the governing council of the Bank of Canada and retain the Canadian dollar as its currency. While it would lead to increased …
19th March 2014
The partial rebound in manufacturing sales volumes in January can be partly blamed on the bad weather, which continues to constrain activity. Nevertheless, the persistent weakness in unfilled orders suggests that manufacturing is still struggling. We …
18th March 2014
The fall in manufacturing capacity utilisation over the past year casts further doubt over the Bank of Canada's expectation that the external sector can take over from households in driving economic growth. The reasons for manufacturing's troubles aren't …
17th March 2014
January's discouraging external trade figures suggest that the economy began the year on a weak footing. Unfortunately, exporters are likely to struggle throughout the year. Although the Canadian dollar has fallen significantly from levels a few months …
12th March 2014
The further acceleration in house price inflation to 5.0% in February, from 4.5% in the previous month, mainly reflects tighter supply and demand conditions. The drop in existing home sales since then, however, suggests that house price inflation will …
The recent rise in inflation prompted the Bank of Canada to take a slightly more hawkish stance in its policy statement last week. At 1.5% in January, inflation is still well below the mid-point of the Bank's 1% to 3% target range. But the dollar's …
10th March 2014
The 7,000 decline in employment in February specifically is not a major concern since the unusually severe winter may have played a role. Nevertheless, the broader picture is that employment has been largely stagnant since last summer and the only reason …
7th March 2014
Although the Bank of Canada left its policy rate unchanged at 1.0% today and maintained its neutral bias, we suspect that the emphasis on the recent rebound in inflation in the accompanying statement will be interpreted by the markets as a more hawkish …
5th March 2014
Although inflation has been uncomfortably low for some time now, the risk of a slide into deflation is still fairly modest. Long-term inflation expectations remain well anchored and the Canadian dollar's recent slump will soon begin to have a more …
3rd March 2014
The Bank of Canada admitted in January's monetary policy statement that "there have been few signs of the anticipated rebalancing towards exports and business investment." Not much has changed since then, suggesting the Bank will keep that language when …
At first glance, the 2.9% annualised gain in fourth-quarter GDP suggests that the economy is on the right track. Unfortunately, growth was once again dependent on spending by heavily-indebted households and inventory building, with business investment …
28th February 2014
The Bank of Canada's key policy rate has been on hold at 1.0% for more than three years now. With inflation still uncomfortably low and economic growth still overly-dependent on debt-fuelled housing activity, there is little prospect of any change in …
26th February 2014
The 2014 annual investment intentions survey, which points to another very modest gain in business investment this year, will come as a blow to the Bank of Canada. The Bank is still hoping for a rebalancing of economic growth, with bigger gains in …
Canada's economic performance over the final quarter of last year was probably the best in more than two years. The breakdown, however, is likely to show that the economy is still heavily dependent on household-related spending and investment. However, we …
24th February 2014
The pick-up in core inflation to 1.4% in January, from 1.3%, reflects both base-year effects and possibly some early impact from the weaker Canadian dollar. The latter is something that we anticipate will cause inflation to nudge higher in the coming …
21st February 2014
Although housing starts have declined over the past two years, the current six-month annualised trend of 191,456 units is arguably still above demographic requirements. With weakening home sales and worsening oversupply, there is nothing to prevent …
17th February 2014
The discouraging decline in December's manufacturing sales volumes and downward revision to the previous month dampens our view that the improving outlook overseas may finally be filtering through to Canada. Still, given the strength in other sectors, we …
14th February 2014
January's pick-up in house price inflation isn't that surprising when you consider last year's home buying rush that was triggered by fears of rising mortgage rates. Now that home sales are dropping back just as quickly as they rebounded, however, it …
12th February 2014
It seems almost certain now that the Federal government will meet its timetable for eliminating the budget deficit before fiscal year 2015-16, which will give it the wiggle room it needed to deliver on its promised tax cuts ahead of next year's federal …
11th February 2014
The breakdown of Canada's sluggish export performance reveals that some of the weakness in the second half of last year should prove temporary. The persistent weakness in some industries such as autos and electronics, however, is more troubling. Although …
10th February 2014
The modest rebound in employment in January, which was not enough to reverse completely the slump last December, suggests that bad weather isn't the only factor depressing labour market conditions. With an export recovery still proving elusive and housing …
7th February 2014
The surprisingly large increase in December's trade deficit provides further evidence supporting our view that Canada's economy isn't benefitting fully from the steadily improving US economy. … International Merchandise Trade …
6th February 2014
The recent slide in the Canadian dollar doesn't greatly improve Canada's economic prospects. The sharp decline looks overdone in our mind and we wouldn't be surprised to see a rebound, at least a temporary one. Even at its current level, it is still too …
5th February 2014
Although economic growth improved over the second half of last year, averaging an estimated 3.0% annualised, there is still no sign of a much-needed rebalancing towards exports and business investment. The breakdown reveals that the unbalanced nature of …
The recent turmoil in emerging markets is a knock to Canada's trade and commodity dependent economy that the Bank of Canada can't ignore. Although it has only had a modest negative impact on Canada's financial markets so far, its too early to know the …
3rd February 2014
November's steady GDP growth of 0.2% m/m supports our view that the economy grew by an annualised 3.0% in the final quarter of last year. … GDP by Industry …
31st January 2014
The recent non-farm payroll figures suggest that wages and salaries growth continued to accelerate in the fourth quarter, which should have helped support stronger consumption growth. … Stronger wages and salaries growth unlikely to …
The Canadian dollar's sharp decline over the past few weeks seems a tad overdone and we wouldn't be surprised if it enjoyed a modest rebound over the coming month or so. As the incoming economic data confirm that Canada's economy grew just as strongly in …
27th January 2014
December's increase in underlying inflation was partly due to base year effects, which the Bank of Canada knows will prove temporary. With timely indicators still pointing to ultra low inflation, the Bank will be as concerned as before about low …
24th January 2014
The much stronger than expected rebound in retail sales volumes in November supports our view that the economy grew by at least 0.2% m/m in that month. For the fourth quarter overall, we still stand by our above-consensus GDP growth estimate of 3.0% …
23rd January 2014
Although it stopped short of adopting an easing bias, the Bank of Canada's policy statement revealed that it is more concerned than before about persistently low inflation. With the long awaited export-led recovery still notably absent and housing likely …
22nd January 2014
The stronger than expected increase in manufacturing sales volumes in November was the third consecutive solid gain and hints that the improving outlook overseas may finally be filtering through to Canada. Nevertheless, we expect that the Bank of Canada …
21st January 2014
Attracted by relatively low government debt, a stronger economic recovery and its healthier banks, foreign investors took a shine to Canadian assets in the aftermath of the financial crisis. More recently, however, those assets appears to have lost their …
20th January 2014
The third consecutive monthly decline in existing home sales in December provides more evidence that the earlier surge seen last summer was mainly a pulling forward of home purchases in response to fears of higher mortgage rates … Declining home sales to …
15th January 2014
The Bank of Canada is likely to stick with its neutral stance in next week's policy statement. But with its hopes of a pick-up in exports still unfulfilled and residential investment likely to re-emerge as a drag on economic growth, we expect that the …
The further uptick in house price inflation to a 16-month high of 3.8% in December, from 3.4%, is consistent with the earlier pick-up in existing home sales seen over the summer. If the recent descent in existing home sales is sustained, however, these …
14th January 2014
The Bank of Canada's latest business outlook survey shows some welcome improvement in investment and hiring intentions but, despite the Canadian dollar's recent decline and stronger sales expectations, export-focused goods producers remain unusually …
13th January 2014
We expect mortgage rates to rise further this year, posing a threat to housing affordability for prospective home buyers. With average house prices already far too high relative to household incomes, higher mortgage rates will translate into even higher …
December's shocking decline in employment and hours worked probably had more to do with severe winter storms rather than the broader state of the economy. Accordingly, we suspect that this large negative shock will be reversed early this year. … Labour …
10th January 2014
Inflation has remained at the bottom of the Bank of Canada's 1% to 3% target range for over a year now, highlighting why the Governor is in no hurry to raise interest rates anytime soon. (See Chart.) Should the economy struggle again this year as we …
9th January 2014
