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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
November's flat export and import trade figures suggest that the economy lost some momentum mid-way through the fourth quarter of last year. Given the fairly strong start to that quarter, however, we still think that GDP may have risen by as much as 3.0% …
7th January 2014
The consensus view that economic growth will accelerate this year is misplaced. While exports and business investment should improve modestly, we anticipate this will be more than offset by weaker housing construction, triggered by a pullback in the …
6th January 2014
October's stronger-than-consensus GDP growth of 0.3% m/m suggests that activity began the fourth quarter on a solid footing. For the quarter as a whole, we now think that the economy will expand by just over 3.0% at an annualised pace. … GDP by Industry …
23rd December 2013
The many large-scale energy-related investment projects that are in the works are certainly an encouraging sign for the longer-term economic outlook. With many of these projects still awaiting final government approval, however, the economic benefits are …
20th December 2013
With core inflation unexpectedly falling even closer to the bottom of the 1% to 3% target range in November, the Bank of Canada will be more worried than before about the downside risks to inflation. … Consumer Prices (Nov.) & Retail Sales …
We anticipate only a modest pick-up in the growth rates of exports and business investment, which will be more than offset by the impact of an outright decline in residential investment and slower consumption growth. After growing by 1.7% this year, GDP …
19th December 2013
October's surprisingly strong gain in manufacturing sales volumes was largely due to the strength of the rebound in food sales. The weakness of sales in most other categories and the downward trend in unfilled orders, however, indicate that conditions …
17th December 2013
The Bank of Canada's latest semi-annual Financial System Review was a stark reminder that a lot could go wrong for Canada over the next year or two. While highlighting the progress in Europe, it now views the emerging market economies as a new downside …
16th December 2013
The further acceleration in house price inflation to a 13-month high of 3.4% in November, from 3.1%, reflects the pick-up in existing home sales seen earlier this year. Most recently existing home sales have dropped back, however, and we expect sales to …
12th December 2013
While the recent condo-driven pick-up in housing starts will provide a boost to fourth-quarter residential investment, the slump in new home sales suggests it will be reversed next year, making housing a drag on GDP growth. … Housing will become a drag on …
9th December 2013
The Bank of Canada's increasingly dovish stance explains only a small part of the recent depreciation of the Canadian dollar. We think it has more to do with the pullback in commodity prices, especially crude oil, which is a negative for the economic …
