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The fiscal crisis in the euro-zone is threatening to derail the global economic recovery. Although Canada is a very open economy with exports still accounting for 30% of GDP, shipments to the euro-zone account for only 4% of those exports, equivalent to …
4th October 2011
July's GDP growth of 0.3% m/m provides further evidence that the economy rebounded this quarter, following temporary supply disruptions to industrial production in the previous quarter. This may be of little comfort, however, given the diminishing growth …
1st October 2011
Recession fears and concerns are understandable, considering that second-quarter GDP contracted and monthly import data received thus far hints at falling business investment, which has been a key source supporting GDP growth in recent quarters. Our …
27th September 2011
Following overly-depressed growth in the second quarter, July's drop in retail sales was weaker than we had expected. Nonetheless, consumer spending growth should still improve this quarter. Judging by the increase in preliminary auto sales in August, …
23rd September 2011
The stronger than expected increase in headline CPI inflation, from 2.7% to 3.1% in August, primarily reflects transitory factors and therefore is of little consequence for the Bank of Canada. More importantly, underlying inflation remains subdued and is …
22nd September 2011
As the outlook for global economic growth deteriorates markedly, there is a growing likelihood that more policy stimulus will eventually be required in Canada. The limited scope for further monetary stimulus, however, will put more of the burden on fiscal …
21st September 2011
As the outlook for global economic growth deteriorates markedly, there is a growing likelihood that more policy stimulus will eventually be required in Canada. With its key short-term rate at 1.0%, the Bank of Canada has a little more scope to provide …
20th September 2011
July's survey of manufacturers showed that sales outpaced market expectations by a wide margin. Most encouragingly, stronger volumes were behind this increase, reflecting the ongoing recovery in auto and petroleum production. This report suggests that the …
16th September 2011
Real personal disposable income growth slowed to a snail pace during the first half of this year, depressing consumer spending in the process. Compared to a year ago, second-quarter real income actually declined. Thankfully, consumer prices are not rising …
13th September 2011
Judging by the declines in the Bank of Canada's Financial Conditions Index (FCI), financial conditions appear to have tightened recently, despite somewhat lower bond yields. Although the amount of tightening thus far has been modest, it is further …
The drop in August employment was disappointing and points to modest growth in household spending this quarter. The only redeeming quality in the jobs report was the rotation from part-time to full-time employment, which helped to lift average hours …
10th September 2011
July's international trade data provides further evidence that the economy rebounded from the disappointing second-quarter contraction, growing by an estimated 2.5% annualised this quarter. Whether or not this economic rebound can be sustained, however, …
9th September 2011
Considering the contraction in second-quarter GDP and evidence of slowing global economic growth and rising financial risks, it is not a surprise to anyone that the Bank of Canada kept its policy interest rate at 1%. More importantly, the Bank's policy …
8th September 2011
Most analysts agree that real Gross Domestic Income (GDI) is another useful indication of economic activity. For the purposes of monetary policy, however, what ultimately matters, more than any other single measure of economic activity, is real Gross …
6th September 2011
It is almost a foregone conclusion that the Bank of Canada will hold its policy interest rate at 1% next week. More importantly, considering the slight contraction in second-quarter GDP and evidence of slowing global economic growth and rising financial …
2nd September 2011
Despite the slight contraction in second-quarter GDP, by 0.4% at annualised rates, we estimate better growth is in store this quarter. A rebound from several unusually severe weather-related factors that dampened production in the second quarter should …
1st September 2011
Most analysts now agree that the Canadian economy stumbled in the second quarter, but we think that the current quarter will be better. A rebound from several unusually severe weather-related factors that dampened industrial production and exports should …
30th August 2011
June's rebound in retail sales was driven by sharply higher auto sales, thanks to earlier-than-normal and more generous price incentives. Since then, however, auto sales have fallen back and other indicators point to more subdued consumer spending in the …
24th August 2011
Canadian house prices have formed a bubble and are vulnerable to a sudden loss of investor confidence. As such, we continue to expect prices to fall substantially over the next few years, which will have significantly negative implications for the broader …
23rd August 2011
The slight pick-up in core consumer price inflation in July will now be of little concern to the Bank of Canada. Considering the global recession fears now gripping markets and lower commodity prices, any lingering worries about inflation must soon give …
20th August 2011
Canada’s Federal Government has declared that it would be prepared to introduce new stimulus measures, but that it would need to see clear signs of the economy contracting before offering more fiscal support. Although we do not forecast a recession, …
18th August 2011
June's survey of manufacturers showed that sales fell more strongly than most had expected, by 1.5% m/m. Weaker volumes were again behind this drop, reflecting the temporary disruptions to auto and petroleum producers but also some unexpected weakness …
17th August 2011
Markets have made a dramatic reassessment of the prospects for monetary, judging by the sharp decline in Overnight Index Swaps rates and Canada Government bond yields. In fact, these rates now suggest that markets expect the Bank of Canada to cut its …
16th August 2011
Reflecting the growing signs of a global economic slowdown, Canada's merchandise exports fell in June. Even so, there are still good reasons to expect that third-quarter export growth will rebound from the 11% annualised decline posted in the second …
12th August 2011
Should the global economy slow more sharply than even our distinctly bearish global forecasts, then we think equity prices in Canada could slide much further into red territory, as would commodity prices no doubt. This scenario would undermine consumer …
11th August 2011
The possible adverse effects from sharply falling equity prices and lower commodity prices on wealth and confidence have increased the risks that Canada's economic recovery might falter during the second half of this year and into next. … Financial market …
9th August 2011
The sharp decline in May's GDP was a reflection of several unusually severe weather-related factors that disrupted energy and metal mining production. Although the negative effects on economic growth are temporary, they have led us to revise down our …
The small increase in July's employment is not entirely surprising, considering the strong gains over the previous three months. More importantly, the details of the jobs report were fairly encouraging for household income growth. Unfortunately, rising …
6th August 2011
The soft patch in household spending may be more than just a blip, judging by the negative effect high energy prices and rising food prices are having on underlying retail sales. Although we anticipate a pick-up in retail spending during the second half …
2nd August 2011
The key message in the July Monetary Policy Report: short term interest rates will remain unusually low for a considerably lengthy period. In a technical box towards the end of the report, the Bank gave its explanation for why this might be the case; …
26th July 2011
May's retail sales are another reminder of the negative effects that high energy and rising food prices are having on discretionary consumer spending. Despite the preliminary data showing strong growth in June's new vehicle sales, the broader evidence …
23rd July 2011
The surprisingly sharp decline in June's consumer price inflation figures reduces the impetus for the Bank of Canada to raise interest rates. Although the decline was perhaps somewhat of an overshoot, factors that have pushed up consumer price inflation …
By dropping the qualification in its policy statement this morning that monetary stimulus will only be withdrawn "eventually", the Bank of Canada seems to be posturing to raise rates. Obviously there is now an upside risk to our forecast that interest …
20th July 2011
Businesses are poised for an employee hiring spree, judging by the upbeat second quarter Business Outlook Survey results. Among the firms surveyed from late May to mid-June, the balance of opinion on hiring intentions rose to its highest level on record. …
19th July 2011
May's survey of manufacturers showed that sales fell more strongly than most expected, by 0.8% m/m. Weaker volumes were behind this drop, mostly due to temporary factors negatively impacting energy and auto production, though lower food production also …
16th July 2011
It is almost a foregone conclusion that the Bank of Canada will hold its policy interest rate at 1% next week. More importantly, we think the Bank will not offer any hint of imminent rate hikes, while possibly placing even more emphasis on renewed …
15th July 2011
Housing starts reached an annualised 197,000 units in June, up from a revised 194,000 in the month before. Housing starts this high are arguably well above estimates of demographic requirements, which we figure is around 175,000. This view is broadly …
14th July 2011
Canada's merchandise trade deficit narrowed trivially in May, from C$0.86bn to C$0.81bn. Even so, we still estimate that quarterly net exports were a significant drag on the economy in the second quarter, which we still estimate grew by just over 1% …
13th July 2011
Following 3.9% annualised growth in the first quarter, our latest calculations point to a substantial slowdown in second-quarter GDP growth, to 1.2%. Although we anticipate a partial rebound in the third quarter, prospects for a sustained rebound in the …
12th July 2011
Recent employment gains have been respectable, including the 28,400 jobs added in June. The thorny issue, however, is that average hours worked are still well below normal, reflecting the sub-par quality of the broader labour market recovery. … Labour …
9th July 2011
Canada's monthly real GDP was unchanged in April, held back by a 6.9% m/m drop in motor vehicle production. Growth should pick up again in the next few months, however, as the supply disruptions that forced the cuts in motor vehicle production start to …
1st July 2011
The increase in the headline CPI inflation rate to an eight-year high of 3.7% in May, from 3.3%, and the pick up in the core inflation rate to a seven-month high of 1.8%, from 1.6%, will no doubt prompt claims that the Bank of Canada is "behind the curve" …
30th June 2011
Canada's recent economic performance has been impressive. After suffering a less severe recession than most other developed countries, it has also enjoyed a relatively more vigorous recovery. Unfortunately, that out-performance was fuelled almost entirely …
29th June 2011
The increase in the headline CPI inflation rate to an eight-year high of 3.7% in May, from 3.3%, and the pick up in the core inflation rate to a seven-month high of 1.8%, from 1.6%, predictably led to claims that the Bank of Canada is "behind the curve" …
28th June 2011
April's retail sales provide more evidence of the negative effects that high energy and rising food prices are having on discretionary consumer spending. Considering that preliminary data for May's new vehicle sales show an even steeper drop in unit …
23rd June 2011
Domestic demand growth is losing momentum. To make matters worse, disruptions to auto and energy exporters have further dampened overall economic growth in the second quarter. Although we anticipate that net exports will provide a lift to economic growth …
21st June 2011
Speaking in Vancouver today, the Governor of the Bank of Canada Mark Carney admitted that housing valuations are elevated and hinted that if there were a sudden weakening in the housing sector, then it could have sizable spillover effects on the economy …
16th June 2011
April's survey of manufacturers showed that sales fell sharply, down 1.3% m/m, primarily due to disruptions in auto production, caused by parts supply shortages from Japan. Taking into account an even larger decline in sales volumes than we had …
Over the last ten years, the accumulation of excess new housing inventory, sharp increases in homeownership rates and rising rental vacancy rates have all coincided with a house price boom and a run-up in financial leverage. We think all these signs point …
14th June 2011
At first glance May's labour force survey appears respectable, with 22,300 jobs added and a material drop in the unemployment rate, from 7.6% to 7.4%. The details, however, are not as encouraging and continue to portray what is still a gradual jobs …
11th June 2011
