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Although the Canadian dollar has held up relatively well among G10 currencies, we think it will weaken in the coming quarters as investors discount a more dovish policy path for the Bank of Canada (BoC). Despite the broad-based strength in the US dollar …
7th September 2023
The Bank of Canada accompanied its decision to leave interest rates unchanged with a pledge to hike again if needed, but we doubt it will need to follow through. With recession risks rising and labour market conditions loosening, we continue to think that …
6th September 2023
Bank maintains hawkish bias, but next move likely to be a cut The Bank of Canada accompanied its decision to leave interest rates unchanged with a pledge to hike again if needed, but we doubt it will need to follow through. With recession risks rising and …
BC port workers’ strike weighs heavily on imports As the BC port workers’ strike weighed far more heavily on imports than exports, the trade data suggest that there are modest upside risks to the preliminary estimate that GDP was unchanged in July. That …
Bank to pause amid rising recession risks The surprise second-quarter contraction in GDP was partly due to the wildfires but, even without that damage, growth would have been very weak. With the August CFIB Business Barometer showing further concerning …
1st September 2023
This page has been updated with additional analysis since first publication. Economy may already be in recession The surprise contraction in second-quarter GDP leaves little doubt that the Bank of Canada will keep interest rates unchanged next week. With …
Higher gasoline prices mean CPI will surprise to the upside of the Bank’s forecasts But GDP growth is slowing and labour market conditions are loosening Bank can afford to wait for more data and is unlikely to hike again Inflation has surprised to the …
30th August 2023
The worst Canadian wildfires on record appear to be behind much of the recent weakness in GDP and, with more areas now under evacuation orders, the data are likely to remain weak in the coming months. Broader negative impact than 2016 wildfires Worst “on …
25th August 2023
Strong immigration and the turnaround in the housing market raise the chance that the economy will avoid recession but, with the Bank of Canada keeping further rate hikes on the table, we still judge that GDP will contract later this year. Even if …
GDP in those sectors normally most sensitive to interest rates has weakened over the past year and is now well below the pre-pandemic trend. The resilience of overall economic growth to higher interest rates is mainly due to ongoing recoveries elsewhere. …
23rd August 2023
Retail sales still struggling as higher interest rates feed through Retail sales volumes broadly stagnated over June and July and would have performed much worse were it not for the improving supply of motor vehicles. While the ongoing wildfires across …
While the renewed rise in headline inflation in July seems concerning, a closer look shows disinflationary pressures are still building in key areas. Together with easing demand, that should give the Bank of Canada enough reason to leave rates on hold in …
18th August 2023
Housing market coming back into balance The decline in the home sales-to-new listing ratio in July supports our forecast that house price growth will slow over the rest of the year. While housing starts remained high in July, they still look likely to …
17th August 2023
Encouraging signs under the surface This page has been updated with additional analysis since first publication. While the continued above-target gains in the CPI-trim and CPI-median core measures may cause some concern for the Bank of Canada, there were …
15th August 2023
Although export volumes fell for the second month running in June, the strength of imports suggests that domestic demand is holding up and the Bank of Canada will be pleased to see that import prices continue to fall. Export volumes weak, but imports …
11th August 2023
Net trade weighed on second-quarter GDP growth Weaker global demand and the fading boost from easing supply shortages took a toll on exports in June, confirming that net trade weighed on second-quarter GDP growth. While the surveys point to further …
8th August 2023
More reasons for the Bank to remain on hold The further rise in the unemployment rate in July and signs that the housing market is cooling again are both reasons to doubt that the Bank of Canada will raise interest rates further. Employment weakened in …
4th August 2023
This page has been updated with additional analysis since first publication. Labour market continues to loosen The small fall in employment and rise in the unemployment rate in July show that the labour market continues to loosen, suggesting that the …
Despite some recent high-profile labour strikes, it still seems likely that overall wage growth will slow sharply during the next 12 months, as labour demand cools and elevated immigration boosts supply. Some commentators have argued that the recent …
2nd August 2023
The Bank of Canada’s Summary of Deliberations highlighted the Bank’s concern that inflation could become stuck above the 2% target. Although headline inflation faces a bumpy downward path over the coming months, we think a faster easing in core inflation …
28th July 2023
This page has been updated with additional analysis since first publication. Sharp slowdown in second quarter growth Despite the rebound in GDP in May, growth in the second quarter looks set to be weaker than expected. With some of the factors supporting …
Strong immigration and the turnaround in the housing market raise the chance that the economy will avoid recession but, with the Bank of Canada back in hiking mode, we still judge that GDP will contract later this year. Even if recession is avoided, a …
24th July 2023
Headline inflation fell to 2.8% in June and, excluding mortgage interest costs, was in line with the 2.0% target. While the Bank’s preferred core measures are still higher, the weakness of retail sales in May and June suggests demand is easing and is …
21st July 2023
Demand not looking so excessive after all Retail sales volumes were little changed in May and the preliminary estimate implies that they dropped back in June. That calls into question the Bank of Canada’s recent claim about “persistent excess demand” and …
Rebound in sales spreads to pre-construction sector The pick-up in existing home sales this year has spread to the pre-construction market, with new home sales in Toronto rebounding strongly. Together with the surge in housing starts in June, that …
18th July 2023
Not as good as it looks This page has been updated with additional analysis since first publication. On the face of it, the sharper-than-expected fall in headline inflation to 2.8% in June and the only modest 0.1% m/m seasonally adjusted rise in the CPI …
The Bank of Canada struck a hawkish tone at its meeting this week, emphasising persistent excess demand and sticky price inflation. Nonetheless, with the upgrades to the Bank’s GDP and inflation forecasts putting them above our own, we think the hike this …
14th July 2023
Easing supply shortages still supporting activity The 2.2% m/m jump in manufacturing sales volumes in May was better than we expected given the weakness of the survey evidence and shows that easing supply shortages are still supporting the sector. While …
The Bank of Canada’s 25bp hike today, taking the policy rate to 5.0%, is likely to be the last in this cycle. With the labour market loosening, core inflation falling and the survey indicators implying that inflation expectations are normalising, we …
12th July 2023
Hike to 5.0% likely to be the last The Bank of Canada’s 25bp hike today, taking the policy rate to 5.0%, is likely to be the last in this cycle. With the labour market loosening, core inflation declining and the survey indicators implying that inflation …
The recent US experience seems to suggest that the household saving rate could fall further as Canadians draw down the savings they built up during the pandemic, supporting consumption. A closer look suggests that the saving rate overstates the health of …
10th July 2023
The data this week showed big improvements in supply in both the labour and housing markets, which should give the Bank of Canada confidence that CPI inflation will continue to decline. We still expect the Bank to raise interest rates by 25bp next week to …
7th July 2023
This page has been updated with additional analysis since first publication. Easing wage growth despite jump in employment The surge in employment in June was not quite as strong as it looks, with hours worked essentially unchanged last month, but still …
Slump in exports a downside risk to GDP growth The slump in export volumes presents downside risks to the preliminary estimate that GDP rose strongly in May, and suggests that the earlier boost from easing supply shortages is now largely behind us. With …
6th July 2023
Economy and housing market enjoying renewed momentum Core inflation pressures easing but still too strong for comfort Loosening labour market means Bank unlikely to raise rates above 5.0% Note: We’ll be discussing the Canadian economic and policy outlook …
5th July 2023
There was plenty for the Bank of Canada to digest this week, with the data showing that core inflation fell in May even as GDP growth picked up strongly again. The resilience of economic activity makes us think that the Bank is still leaning toward …
30th June 2023
The Bank of Canada’s quarterly business and consumer surveys showed a broad decline in inflation expectations and are consistent with a renewed slowdown in GDP growth. The Bank could use those developments to justify keeping interest rates unchanged at …
This page has been updated with additional analysis since first publication. Weak April offset by strong May The stagnation in GDP in April was weaker than expected but, with the preliminary estimate pointing to a sharp rise in GDP in May, quarterly …
Overview – Strong immigration and the turnaround in the housing market raise the chance that the economy will avoid recession but, with the Bank of Canada back in hiking mode, we still judge that GDP will contract later this year. Even if recession is …
27th June 2023
Some improvement, but core inflation pressures still a bit too strong for comfort This page has been updated with additional analysis since first publication . While the steep declines in both headline and core inflation in May were partly due to …
Recent data fan Bank of Canada's fears The latest Summary of Deliberations gave no hint about whether the Bank of Canada will raise interest rates again at the July meeting but, with little progress yet on any of the key factors that the Bank is watching, …
23rd June 2023
This page has been updated with additional analysis since first publication. Broad-based resilience in spending The stronger-than-expected rise in retail sales in April suggests that household spending was resilient going into the second quarter. Both the …
21st June 2023
Housing continues to shrug off high interest rates The recovery in house prices continued in May, with the sales-to-new listing ratio pointing to further gains ahead. Rising interest rates will have a more limited impact on home purchases than existing …
19th June 2023
Households feeling the pinch from higher rates Heavily indebted households are still being sheltered from the full impact of the surge in interest rates over the past 18 months, but their finances look ever-more perilous. The household debt to …
16th June 2023
Sales benefitting from easing supply shortages The resilience of manufacturing sales suggests easing supply shortages are still supporting activity, with the transport sector reaping much of the benefits. Nevertheless, the surveys point to a weaker …
15th June 2023
The fall in employment in May suggests the Bank might not need to follow its 25bp hike this week with another in July. But with employment among prime-age people continuing to rise strongly and house prices surging last month, we still suspect the Bank is …
9th June 2023
Labour market starting to loosen The fall in employment and the increase in the unemployment rate to 5.2% in May will probably not prevent the Bank of Canada from raising interest rates again at its July meeting, but the moves reinforce our view that the …
Labour market starting to loosen The increase in the unemployment rate to 5.2% in May will probably not prevent the Bank of Canada from raising interest rates again at its July meeting, as the weakness was partly a statistical effect related to reduced …
The Bank of Canada’s 25bp interest rate hike today is unlikely to be the last, with the rapid turnaround in the housing market and concerning underlying inflation dynamics raising the case for at least one more hike in July, to take the policy rate to …
7th June 2023
Bank resumes rate hikes and probably another to come in July The Bank of Canada’s 25bp interest rate hike today is unlikely to be the last, with the rapid turnaround in the housing market and concerning underlying inflation dynamics raising the case for …
