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April’s trade data show that, despite a massive drop in imports from Japan, Canada's trade deficit actually widened. The drop in imports, concentrated in Japan and other OECD countries, was overshadowed by an even larger drop in exports, mostly to non-US …
10th June 2011
The new Conservative majority government now aims to tackle its updated C$36.2bn deficit essentially over four years, which we think will prove far too optimistic. A global economic slowdown, a drop back in commodity prices and a slump in the domestic …
6th June 2011
Canada's gradual export recovery, particularly in terms of volumes, reflects the fragile US economic turnaround and the runaway Canadian dollar; which has been pushed up in the wake of the commodities boom and strong investment portfolio demand. The pace …
If the Bank of Canada was trying to hint in last week's statement that a rate hike might be on the way then that message was largely drowned out by the unrelenting flow of weak economic data coming out of the US. All things considered, we still anticipate …
The policy statement from the Bank of Canada this morning highlighted that ultimately it will raise rates at some point, this year or next year, but even then it said the extent of any policy tightening would need to be carefully considered. We still …
31st May 2011
The pick up in GDP growth to 3.9% annualised in the first quarter, from 3.1% in the fourth quarter, is unlikely to be sustained. With the temporary boost to growth from sharply higher energy and auto production now behind us, the economy appears poised to …
30th May 2011
The week ahead will be dominated by first quarter GDP and the Bank of Canada's policy decision. We estimate that Canada's economy grew by 3.7% annualised in the first quarter. Temporary disruptions to auto and energy production, however, suggest that …
It is almost a foregone conclusion that the Bank of Canada will hold its key policy interest rate at 1% next week. More importantly, we think the Bank will refrain from offering hints of imminent rate hikes, particularly considering the disruptions to …
25th May 2011
Renovation investment has risen to historically high levels in Canada. This boom in renovation is another symptom of a broader housing bubble. The very high level of construction employment is another tell-tale sign. Falling house prices, however, could …
23rd May 2011
The latest retail sales data confirm that real consumption growth slowed to just above 1% annualised in the first quarter, well below the 5% pace seen in the final three months of last year. Given the past increases in the prices of essentials such as …
20th May 2011
Consumer price inflation remained at 3.3% in April, though still up from 2.3% just three months ago. Measures of underlying inflation, more importantly, remained subdued. Provided that inflation expectations stay this well anchored, headline inflation …
March's survey of manufacturers offers some encouraging news in the form of higher sales volumes and a jump in unfilled orders. With autos production operating at lower levels due to parts supply disruptions, stronger production outside of autos should …
16th May 2011
Last week's drop back in commodity prices was a stark reminder of why the Bank of Canada has largely ignored what looks increasingly like a temporary commodities-related spike in consumer price inflation. With the unemployment rate still elevated, …
Following the boost from a rebound in energy output late last year, export growth held up relatively well in Q1, thanks in part to a rebound in the auto sector. March’s trade data suggest the economy is largely maintaining this momentum. … International …
11th May 2011
Stronger business investment in non-residential structures should at least partly buffer the negative impact on the construction sector from an expected downturn in homebuilding and the tailing off of spending on public construction projects included in …
9th May 2011
April's job figures provide some comfort that economic growth held up towards the end of the first quarter, following February's decline in monthly GDP. Given the slowdown we expect in the US later this year however, coupled with a downturn in Canada's …
6th May 2011
Housing investment has rebounded close to historical highs, since the sharp declines during the global financial crisis. Unlike in other countries, this 'V' shape recovery was due to a stable banking sector, solid mortgage credit growth and the good …
4th May 2011
The Federal election results should be supportive for equity markets, the Canadian dollar and business investment. A pro-business majority Conservative government may also look to forge new bilateral trade agreements, which would help to diversify …
3rd May 2011
The latest Teranet National Bank house price report, released last week, provided a timely counterbalance to the growing belief that Canada's housing boom is being driven solely by Chinese purchases of high-end homes in Vancouver. The regional breakdown …
2nd May 2011
After several months of very strong growth, the 0.2% m/m decline in Canada monthly GDP in February is not a major concern. We had anticipated a drop back and even the consensus forecast was for no change. … GDP by Industry …
29th April 2011
Sharply higher commodity prices and a runaway Canadian currency are boosting Canada's terms of trade, a key source of growth in incomes and therefore domestic spending. In some cases, specific commodity prices have risen above the recent highs seen back …
25th April 2011
The latest retail sales data add to the evidence that real consumption growth slowed to around 2% annualised in the first quarter, less than half the 5% pace seen in the final three months of last year. Given the continued sharp increases in the prices of …
21st April 2011
The pass through of higher commodity prices was behind the jump in CPI inflation, to 3.3% in March from 2.2% in February. Considering the temporary nature of these supply shocks, however, we still don't anticipate any change in monetary policy this year. …
19th April 2011
The Bank of Canada's April Monetary Policy Report showed that it expects the global economy to grow at a steady pace over the next three years. Closer to home, it assumes growth in the US economy will pick-up somewhat over this period, despite government …
18th April 2011
The policy statement from the Bank of Canada this morning signalled that it is still in no rush to raise interest rates. In particular, it offered no hint that a summer rate hike is coming, supporting our view that policy could be on hold for a lot longer …
12th April 2011
The debate surrounding the merits of corporate tax cuts continued last week, with the Globe and Mail running a front page headline that claimed the reductions already put in place hadn't boosted investment. In general, the academic literature just about …
11th April 2011
Despite recent signs of a pick up, the economy is still not growing rapidly enough to drive the unemployment significantly lower. In addition, average hours worked remains well below normal levels, reflecting the relatively high share of part-time jobs in …
8th April 2011
March's employment report was disappointing to everyone, with net employment edging lower by 1,500 jobs. Although the unemployment rate nudged lower, from 7.8% to 7.7%, this came about by way of fewer people entering the labour force in search of work. …
It is almost a foregone conclusion that the Bank of Canada will hold its key policy interest rate at 1% next week. More importantly, we think the Bank will refrain from offering material hints of imminent rate hikes. In any case, should the Bank decide to …
7th April 2011
Campaigning for the Federal election on May 2nd got well underway last week, with most of the major parties unveiling new economic policy initiatives. The bottom line is that the focus is still on eliminating the Federal budget deficit, which is expected …
4th April 2011
The recent acceleration in monthly GDP growth is being driven principally by a rebound in manufacturing output, as the temporary disruptions that hit autos production last fall start to ease. We still expect GDP growth to drop back later this year, …
31st March 2011
In our opinion, current consensus forecasts that real GDP growth will better 3% annualised over the first half of this year are too optimistic. Admittedly, the monthly GDP data present a fairly solid hand-off to GDP growth in the first quarter. More …
28th March 2011
Although the past run-up in agricultural commodity prices will push food prices and headline CPI inflation somewhat higher later this year, we also predict that measures of underlying CPI inflation will continue to remain muted this year and next. … …
21st March 2011
The modest dip in inflation in February was largely due to some strong base year effects, stemming from the spike in prices during last year's winter Olympic Games. We still expect headline CPI inflation to climb to around 3% by mid-year, as the …
18th March 2011
January's survey of manufacturers indicates that production continued to recover lost ground early in the New Year. Much of this strength is attributed to the pick-up in auto production. There is no denying that underlying economic growth is improving, …
16th March 2011
February’s employment report was lukewarm, with net employment rising by 15,100. Nonetheless, job creation over the last three months suggests that the pace of underlying economic growth is improving. However, the types of jobs being created add to an …
11th March 2011
January's merchandise trade data was heavily influenced by activity in the auto sector. Mixed export figures and stronger imports (revisions included) suggest that the first-quarter contribution from net exports to GDP growth might reverse the positive 5% …
10th March 2011
Canadian economic growth improved to 3.3% annualised in Q4 from 1.8% in Q3. The composite leading indicator points to more modest growth of around 2% annualised over the first-half of this year. Over this period, we expect to see some slowing in …
2nd March 2011
The policy statement from the Bank of Canada this morning signalled that it is in no rush to raise interest rates, stressing as before that "any further reduction in monetary policy stimulus would need to be considered carefully." If the Bank really was …
1st March 2011
The rebound in GDP growth to 3.3% annualised in the fourth quarter, from growth of 1.8% in the third, confirms that the economy regained some lost momentum late last year. Still, we forecast that economic growth is set to slow later this year, and further …
28th February 2011
It is almost a foregone conclusion that the Bank of Canada will hold its key policy interest rate at 1% next week. More importantly, we think the Bank is unlikely to change its stance on monetary policy at all this year. As such, we think the market …
24th February 2011
Because Canada emerged from the global financial crisis largely unaffected, many Canadians now appear to believe that the economy is somehow invincible. This level of hubris is disconcerting when housing valuations have lost all touch with the …
23rd February 2011
It is just a matter of time before the recent rapid increases in agricultural commodity prices lead to higher consumer price inflation. Even though the headline CPI inflation rate edged down to 2.3% in January, from 2.4%, we anticipate that it will be up …
18th February 2011
December's survey of manufacturers was a disappointment, to us and almost everyone. Not only was growth in shipments much weaker than most had expected, more importantly declines in new and unfilled orders point to further softness ahead. … Monthly …
16th February 2011
December's trade data confirm that net exports made a very strong contribution to GDP growth in Q4. We estimate that GDP growth accelerated to 3.5% annualised in the final three months of last year. Nevertheless, this export strength partly reflects a …
11th February 2011
Solid increases in employment over the last three months are consistent with the pick-up in economic growth in Q4. However, the unfavourable split between part-time and full-time workers added in January suggest that the recovery in average hours worked …
4th February 2011
We doubt that the economic recovery is on the secure footing required for it to maintain its recent pace. We expect GDP growth of just 1.5% in both 2011 and 2012. But at least the UK has turned a corner. … House prices likely to fall for several …
3rd February 2011
We estimate that surging agricultural commodity prices will drive consumer food inflation to around 5% later this year, from just under 2%, which would add around 0.8 percentage points to headline CPI inflation. However, this bout of food inflation will …
31st January 2011
November GDP data confirm the likely pick-up in fourth quarter economic growth to more than 2.0% from 1.3% in the third. While a stronger US economy will help Canadian industry in the near-term, we think the over-valued Canadian dollar, waning government …
