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There are increasing signs that the most leveraged borrowers are struggling to refinance their mortgages with traditional lenders. The small but meaningful number of insured mortgage holders who took out a two-year fix when house prices peaked in early …
6th November 2023
Employment edged up in October but the broad-based weakness of GDP growth, the depressed business surveys and the rapidly weakening housing market all suggest that the economy is in the early stages of recession. GDP probably contracted again last quarter …
3rd November 2023
Looser labour market driving softer wage pressures This page has been updated with additional analysis since first publication. The more modest rise in employment and essentially unchanged hours worked in October suggest that labour demand is easing …
The government today confirmed that it intends to welcome an increasing number of permanent residents in the next couple of years. Even if the number of permanent residents continues to rise, however, the record number of temporary residents currently in …
1st November 2023
This page has been updated with additional analysis since first publication. The surprise stagnation in August and preliminary estimate that GDP was unchanged again in September imply that third-quarter GDP probably edged down by 0.1% annualised, marking …
31st October 2023
The Bank of Canada’s insistence that inflationary risks have increased seems at odds with its new forecasts, which show a large degree of economic slack opening up next year. Our view that the Bank is still overestimating the near-term outlook for both …
27th October 2023
Strong immigration is unlikely to be enough to prevent a mild recession, with GDP contracting recently and the business surveys consistent with further declines. As house prices are falling again, household debt is elevated and high interest rates are …
25th October 2023
Although the Bank of Canada maintained its tightening bias today, the rest of its communications suggest that the Bank is growing more confident it has done enough to eventually get inflation back to 2%. We continue to expect the Bank to cut interest …
Bank maintains tightening bias but next move likely to be a cut Although the Bank of Canada maintained its tightening bias today, the rest of the policy statement suggests that the Bank is growing more confident that its job is done. We continue to expect …
The renewed weakness in the housing market and likelihood that mortgage interest cost inflation will soon ease are reasons to expect core inflation to trend lower in the coming months. Next week, the Bank of Canada’s new forecasts may show that it thinks …
20th October 2023
Weakness in sales volumes adds to recession fears The weakness of retail sales volumes in August and September suggest that consumption is stagnating at best, and that “excess demand” has faded faster than the Bank of Canada initially expected. That is …
Recession risks rising and inflation falling again Bank to remain on hold but stress too soon to declare victory Bank’s latest analysis implies QT could continue until as late as 2026 The business surveys point to rising recession risks and core inflation …
18th October 2023
The weakness of GDP growth in the second and third quarters means that the Bank of Canada is likely to make a marked re-assessment of its output gap estimates in its October Monetary Policy Report (MPR). Some indicators suggest that output has already …
House prices heading lower again The renewed increases in mortgage rates and new listings mean we now expect house prices to fall by 5% over the next six months. The big risk, however, is that we are underestimating the degree to which forced sales are …
17th October 2023
This page has been updated with additional analysis since first publication. Fall in inflation to keep Bank on the sidelines The larger-than-expected falls in headline and core inflation in September should be enough to finally persuade markets that there …
The Bank of Canada’s quarterly surveys show that businesses’ inflation expectations continue to decline, albeit slowly, and point to a growing risk that the economy will fall into recession. Accordingly, we continue to doubt that the Bank will raise …
16th October 2023
Manufacturing losing momentum The surprise fall in manufacturing sales volumes in August reduces the chance of GDP rising by any more than the initial preliminary estimate of a 0.1% m/m gain, and means a second consecutive contraction is still on the …
The fall in house prices in September shows just how quickly conditions in the housing market have shifted and the plunge in the sales-to-new listing ratio points to more weakness to come. That is another reason to expect the Bank of Canada to cut …
13th October 2023
The recent strength of core inflation compared to that in the US is mainly due to a rebound in durable goods prices. That has little to do with demand, which has weakened to a greater extent in Canada, suggesting that either the earlier depreciation of …
11th October 2023
The further rise in home listings in September and likelihood that mortgage rates will increase amid the global bond market sell-off suggests that house prices will soon fall again. While employment rose strongly in September, the fall in hours worked …
6th October 2023
Wage pressures easing This page has been updated with additional analysis since first publication. The strong headline employment gain in September was entirely due to a rebound in educational services employment, with employment elsewhere edging down. …
Surge in exports an upside risk to preliminary GDP estimate Exports rose by far more than imports in August, even as the latter benefited more from the fading disruption from the earlier BC port strikes. That suggests there are upside risks to the …
5th October 2023
The sell-off in bond markets has taken a breather today, helped in part by softer data on the US labour market. However, the scale of the moves over the past week has invoked comparisons to previous financial crises that have been caused by sharp moves in …
4th October 2023
The recent acceleration in immigration may not be enough to keep the economy afloat, with the latest data and surveys pointing to an increased chance that GDP will contract over the rest of the year. 40,097,761 and counting Stats Can confirmed this week …
29th September 2023
This page has been updated with additional analysis since first publication. On the cusp of recession The economy failed to make much headway in July and August and the latest business surveys suggest that GDP probably contracted in September, which would …
Strong immigration and the resilience of 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 …
27th September 2023
Overview – We expect another few quarters of near-zero GDP growth to lead to an annual gain of just 0.7% next year. Even with higher oil prices, the weakness of economic growth leaves scope for CPI inflation to fall back to the 2% target in 2024. That …
26th September 2023
Given clearer signs of economic weakness in recent weeks, we think the surprise increase in underlying inflation pressures in August means the Bank of Canada is more likely to keep interest rates at their current level for longer than to raise rates …
25th September 2023
Retail sales volumes weakening despite strong population growth Retail sales volumes edged down in July and the preliminary estimate implies they fell even more sharply in August. Given that population growth has accelerated in recent months, retail sales …
22nd September 2023
This page has been updated with additional analysis since first publication. Jump in core inflation puts renewed pressure on the Bank The larger rise in core prices in August is bad news for the Bank of Canada although, with high interest rates now …
19th September 2023
House price inflation turned positive in August, but the smaller monthly price gain combined with signs of easing demand and increasing supply show that the housing market continues to cool. The 0.4% y/y increase in the MLS House Price Index in August was …
18th September 2023
A recent poll suggests that Canadians are growing sceptical of the government's high immigration targets. Whether policy shifts or not, it is inevitable that net immigration will eventually slow from record rates, but there is no sign of that yet. Opinion …
15th September 2023
Easing supply shortages continue to support activity The continued strength of manufacturing sales in July suggests that GDP may be stronger than initially expected, as easing supply shortages continue to support the manufacturing sector. While there may …
CPI food inflation has remained elevated in recent months but, with wholesale price growth easing rapidly, we are confident it will soon fall sharply. That will help to offset the impact of higher oil prices on energy inflation and means there is still …
14th September 2023
In his speech this week, Governor Tiff Macklem sounded much more confident that the Bank will be able to meet its 2% inflation target. The latest labour market and local housing data suggest that may still be possible without a recession. Policy rate has …
8th September 2023
This page has been updated with additional analysis since first publication. Rebound in hiring should ease recession concerns The rebound in employment and larger increase in hours worked in August suggest the economy bounced back following some of the …
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
