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We expect the Bank of Canada to retain its tightening bias in next week's policy statement. With the euro-zone taking a temporary step back from the brink and US consumers spending more freely, the Bank's warning that its policy rate will eventually need …
17th October 2012
The solid 1.8% m/m rebound in August's manufacturing sales volumes, partially due to volatility in petroleum and coal products, and upward revisions to July's data are encouraging. Overall, this helps to alleviate some of our earlier concerns about …
16th October 2012
Businesses are clearly more cautious about the outlook for sales and we think they are still too optimistic, especially now that the domestic economy looks vulnerable to a housing correction. Accordingly, we would not be surprised if investment and …
Revised data released today show that Canada's household debt problem is even worse than previously thought. Debt growth dynamics over the last decade look eerily similar to the US experience, just before their dramatic housing bust. Overall, this …
15th October 2012
Disappointing third-quarter trade figures, both for exports and imports, suggests that even our own bearish view on quarterly GDP growth of 1.4% annualised might be too high. Barring significant revisions to September's international trade figures, it …
August trade figures were disappointing. Export volumes were largely unchanged and there were downward revisions to export growth in previous months. Overall, we calculate that net exports likely subtracted around 1 percentage point or more from …
11th October 2012
Government officials insist that much of the slack in the labour market following the 2009 recession has been taken up. Alternative measures, however, contradict this message. Admittedly, the official unemployment rate has declined from its recession …
The IMF's revised economic growth outlook for Canada, which anticipates a slight pick-up in 2013 annual GDP growth, looks in our view to be overly optimistic. As we forewarned, the global economic slowdown is deepening and Canada's overheated housing …
9th October 2012
This report is only available as a PDF. Click to download. … Canada's cautious corporations …
8th October 2012
September's consensus blowing 52,100 gain in employment seems at odds with the recent lacklustre pace of GDP growth. The increase in the unemployment rate, to 7.4%, from 7.3% in August, is more consistent with other labour market measures. This labour …
5th October 2012
This report is only available as a PDF. Click to download. … Rebound in small business optimism no game changer …
4th October 2012
We expect annual CPI inflation to fall from an already muted 1.6% this year to only 1.2% next year, as GDP growth slows and economic slack increases. The outlook for 2014 looks much the same. … Lower inflation around the …
2nd October 2012
Changes to Canada's quarterly national accounts methodology have resulted in a higher level of GDP. These important changes, however, have not significantly affected GDP growth and does not change our bearish outlook regarding Bank of Canada interest …
1st October 2012
Slumping home sales is casting a dark shadow over prospects for new housing construction. Although the recent surge in multi-unit housing starts might sustain the elevated level of overall housing construction for a while longer, it seems that increasing …
July's stronger than expected 0.2% m/m increase in GDP, partly due to a rebound in petroleum and auto manufacturing, follows a weak downward revised 0.1% m/m advance in the month before. Given growing external and domestic headwinds, however, we still …
28th September 2012
Although consumption growth has been fairly weak in the first half of this year, favourable income trends and a rebound in July's retail sales suggest that it may have picked up a little in the current quarter. The rally in equity markets and improved …
26th September 2012
July's 0.6% m/m gain in retail sales volumes was somewhat stronger than we had assumed, but only helps to offset declines in wholesale trade and manufacturing sales, which we think restrained July's GDP growth to 0.1% m/m. Accordingly, the evidence still …
25th September 2012
The recent surge in the Canadian dollar coincides neatly with the general rally in equity and commodity markets. The economic fundamentals that would typically justify this movement, however, are lacking. The latest survey evidence suggests that the …
24th September 2012
The official 'core' inflation figure, which nudged down to 1.6% in August from 1.7% in July, is likely to decline further in the coming months as external and domestic risks dampen GDP growth. With unemployment likely to rise as a result, we expect the …
Canada's already lacklustre rate of economic growth is only going to slow further as the housing correction intensifies. Home sales are now falling sharply and it is only a matter of time before prices begin to decline. We still believe that house prices …
20th September 2012
The decade-long run-up in home prices, which has seen prices rise in some cities by over 150%, is now going into reverse, with national home prices falling in August for the first time in more than two years. While prices might tread water for a few more …
19th September 2012
The recent slump in home sales suggests that a housing correction is underway. Assuming that sales continue to trend lower over the remainder of this year, then the typical lag relationship between sales and prices indicates that house prices will …
17th September 2012
The surge in Canada's monthly trade deficit to a record high of C$2.34bn in July illustrated that the deteriorating global economic backdrop is beginning to have a very marked impact. The widening of the deficit was almost entirely due to a very sharp …
The surprising 2.0% m/m decline in manufacturing sales volumes in July, partly due to volatility in aerospace, casts doubt over whether or not the economy actually grew in that month. This weakness further increases the chance that GDP growth this quarter …
14th September 2012
Households have been running a financial deficit for over a decade, a significant departure from their normal role as net savers, resulting in a massive increase in household debt. This trend has coincided with a sharp run-up in house prices of historical …
12th September 2012
July's 1.6% m/m drop in export volumes was weaker than we had assumed, which suggests that net exports might remain a drag on GDP growth this quarter. This increases the chance that economic growth will turn out weaker than the annualised 1.8% in the …
11th September 2012
The stronger than expected 34,300 rebound in August employment, which offsets a similar decline in the prior month, leaves employment barely higher than three months ago. Dwindling employment gains supports our view that the Bank of Canada will be forced …
7th September 2012
The OECD is now forecasting that growth in the G7 economies will slump over the second half of this year, barely managing to stay in positive territory, before picking up materially next year. Although we agree that North America's growth prospects are …
The Bank of Canada continues to insist that its policy rate will eventually need to rise from the current 1.0%, even as the global economic slowdown intensifies and the domestic housing boom shows signs of going into reverse. We suspect it won't be much …
5th September 2012
Canada's current account deficit is likely to widen due to slower forecast global economic growth and lower commodity prices. That said, the large net financial deficit of households indicates that Canadians are living beyond their means, encouraged by …
31st August 2012
Canada's 1.8% annualised second-quarter GDP growth was slightly stronger than we had assumed, but was still short of the 2% or more needed to help reduce excess capacity in the economy. With inflationary pressures already subdued, this second-quarter …
June's non-farm payroll survey data, which showed solid gains in average weekly earnings and employment, indicate that better second-quarter wages and salaries growth supported stronger consumption growth. We estimate that this growth helped bolster GDP …
30th August 2012
The 4.9% q/q decline in second-quarter business operating profits casts further doubt on the outlook for investment and payroll employment. We certainly expect the decline in profit margins to continue this year and next as slower global economic growth …
29th August 2012
The Bank of Canada's policy statement next week is likely to retain its hawkish bias about the need to raise interest rates. Given the faltering global economy and stalling domestic housing market, however, we expect this hawkish bias to be toned down in …
28th August 2012
Canada's employment gains during its economic recovery have been far from broad-based and bolstered by an oversized contribution from the public sector. In addition, the official unemployment rate understates the considerable slack that exists in labour …
24th August 2012
We now estimate that second-quarter GDP grew by an estimated 1.6% annualised, slightly below the Bank of Canada's revised 1.8% prediction. More importantly, economic growth below 2% is not enough to absorb the excess slack in the economy. Unfortunately, …
June's slight dip in retail sales volumes, paired with a decline in wholesale trade and a modest increase in manufacturing sales, indicates that monthly GDP grew by 0.1% to 0.2% m/m in June. This suggests some minor downside risk to our second-quarter GDP …
22nd August 2012
While the drought threatening US farmers' crops has led to a surge in agricultural crop prices, many farmers in Western Canada are thankfully anticipating a return to normal production and in some cases record crop yields. All things considered though, …
Market expectations of higher interest rates over the next 12 months look misplaced. The global economic outlook has deteriorated, with much of Europe in recession and the US economy facing a fiscal cliff. In addition, Canada's domestic economy is showing …
17th August 2012
The decline in the official 'core' inflation figure, to 1.7% in July from 2.0% in June, was partly due to continued volatility in vehicle prices. With inflation remaining subdued and the downside risks to global economic growth threatening even lower …
The surprising 0.4% m/m decline in manufacturing sales in June was largely explained by ongoing volatility at petroleum refineries. For this same reason manufacturing sales volumes increased more modestly than we had expected, up by just 0.1% m/m. …
16th August 2012
Consumption growth has slowed in the first half of this year, a sign perhaps that households are becoming circumspect, in the face of a global economic downturn and the rising likelihood of a hard landing in Canada's housing market. We anticipate that the …
We doubt that the recent rally in the Canadian dollar to above parity against its US counterpart will last. Admittedly, the safe haven status of the currency may continue to support it in the near-term, which has prompted us to revise up our forecast to …
13th August 2012
July's surprisingly large 30,400 decline in employment, following two months of paltry gains, is a bad start to the second half of this year. Admittedly, the underlying details were better than the disastrous headline figure. All things considered though, …
10th August 2012
The recent strength in imports of machinery and equipment suggest business investment is on a tear. Closer examination of productivity-boosting investment, however, suggests progress has been modest. This supports the Bank of Canada Governor Mark Carney's …
The surge in housing starts, driven entirely by hi-rise condominium construction despite already high inventory, is now glaring evidence of overbuilding. Anecdotal evidence, meanwhile, points to plummeting home sales, suggesting that buyers' expectations …
June's 0.3% m/m gain in export volumes together with upward revisions to previous months indicate that second-quarter exports increased, a somewhat stronger outcome than the slight decline we had assumed. Moreover, a stronger profile for imports, although …
9th August 2012
The below par 2% rate of Canadian GDP growth over the first half of this year must be a concern for policy makers, particularly when the chances are that growth will slow even further in the second half of this year. Before the end of 2012, we expect the …
The anaemic rate of Canadian economic growth is becoming a major concern, particularly when the chances are that growth will only slow further in the second half of this year. Before the end of this year we expect the Bank of Canada to drop the language …
3rd August 2012
The further decline in the CFIB's small business barometer in July is an early indication that the overall pace of economic recovery may have slowed further. While GDP growth in the second quarter is on track to come at around 1.7% annualised, our …
2nd August 2012
