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The Bank of Canada’s first-quarter Senior Loan Officer Survey (SLOS) showed a sharp tightening of mortgage lending standards, but we already know that has not been enough to prevent a resurgence in the housing market. While bank lending standards for …
12th May 2023
Following the renewed concerns about regional US banks this week, markets are again pricing in interest rate cuts from the Bank of Canada later this year. From a domestic perspective, however, the strength of the local real estate board data in April and …
5th May 2023
Labour market conditions easing despite unchanged unemployment rate The decline in full-time positions in April means that the large rise in total employment was weaker than it looks. Hours worked only crept up during the LFS reference week and, given the …
Labour market resilient, but small cracks emerging The decline in full-time positions in April means that the large rise in total employment was weaker than it looks. Hours worked only crept up during the LFS reference week and, given the public sector …
Downside risks to first-quarter GDP growth despite export outperformance The small rise in export volumes and slump in imports in March confirms that net trade improved last quarter. However, the weakness of imports means there is a risk that the …
4th May 2023
Downside risks to Q1 GDP growth The small rise in export volumes and slump in import volumes in March confirms that net trade boosted GDP growth last quarter. However, as lower imports are likely to be reflected in slower inventory building – which the …
Although the unemployment rate remains near a record low, the decline in vacancies suggests that labour market conditions have nevertheless eased, supporting our view that wage growth is close to a peak. While the unemployment rate has been unchanged at …
3rd May 2023
The Bank of Canada’s Summary of Deliberations suggests it was closer to resuming interest rate hikes in April than we thought. Nonetheless, as the data releases this week showed a fall in the job vacancy rate and point to a contraction in March GDP, it …
28th April 2023
Decent first quarter likely to be followed by contraction The small rise in GDP in February points to healthy first-quarter growth but, with the preliminary estimate pointing to a contraction in March and activity set to suffer in April due to the federal …
Decent first quarter likely to be followed by contraction The small rise in GDP in February points to a healthy first-quarter growth rate but, with the preliminary estimate pointing to a contraction in March and activity set to suffer in April due to the …
House prices edged up in March and the sharp rise in the sales-to-new listing ratio suggests there are further gains to come. (See Chart 1.) As the improvement has been driven mainly by a collapse in new listings, while buying power is still constrained …
26th April 2023
There was positive news for the Bank of Canada this week, as core inflation eased further in March. While our new house price forecasts imply there will be less disinflationary pressure from shelter prices this year than we previously anticipated, the …
21st April 2023
Momentum fading After a strong start to the year, retail sales volumes dropped back in February and the preliminary estimate implies they fell again in March. While consumption probably still rose at a healthy pace in the first quarter, that weakness is a …
Housing past the worst, but risks remain House prices edged up in March and the jump in the sales-to-new listing ratio implies they will rise further this quarter. With affordability still very stretched, we assume that there will be a renewed period of …
19th April 2023
Base effects helped to pull headline inflation lower in March, but there were also encouraging signs in core inflation, as the average three-month annualised gain in CPI-trim and CPI-median fell to a 16-month low. We continue to expect headline and core …
18th April 2023
Note: We discussed our revamped FCIs and took your questions on global financial conditions in a 20-minute online briefing on Thursday, 20 th April . Watch the recording here . We have revamped our financial conditions indices (FCIs) for advanced …
Core inflation pressures continue to ease While base effects helped to pull headline inflation sharply lower in March, there were also some encouraging signs in core inflation, as the average three-month annualised gain in CPI-trim and CPI-median fell to …
Bank of Canada Governor Tiff Macklem used his press conference this week to push back against expectations for interest rate cuts later this year. That partly reflects the Bank’s less downbeat assessment of the economic outlook, but the nascent rebound in …
14th April 2023
Manufacturing outlook remains challenging After a bright start to the year, manufacturing activity weakened in February. While that was partly due to temporary factors that are likely to be quickly reversed, the surveys point to a challenging outlook. The …
The Bank of Canada delivered a mixed message today, noting that it is more confident inflation will decline in the next few months, but less confident that inflation will fall all the way to 2.0% as quickly as previously anticipated. Nonetheless, with the …
12th April 2023
The Bank of Canada delivered mixed messages today, noting that it is more confident that inflation will decline in the next few months but less confident that inflation will return to 2% as quickly as it previously anticipated. Nonetheless, with the …
The local real estate board data suggest that new listings fell again in March, defying expectations that high interest rates could lead to forced home sales. With supply falling by more than demand, the risks to our house price forecasts lie to the …
6th April 2023
Labour market conditions easing despite low unemployment rate The unemployment rate remained very low at 5.0% in March but, with wage growth slowing and the survey indicators pointing to a sharper decline ahead, the Bank of Canada is unlikely to be too …
Inflation has fallen faster than Bank expected Probably too soon for Bank to drop its bias toward further rate hikes New neutral policy rate estimate could move long-run rate expectations The recent banking turmoil in the US means the Bank of Canada may …
5th April 2023
Underlying inflation pressures are still well above the 2% mid-point of the Bank of Canada’s target range, but there are several reasons to expect disinflationary forces to build. We forecast that CPI inflation excluding food and energy will fall to 2% at …
Net trade on track to boost quarterly GDP growth Exports are still on track to rise this quarter, despite declining in February specifically, but the renewed deterioration in the survey-based export indicators points to weakness in the second quarter. The …
Net trade on track to boost quarterly GDP growth Exports are still on track to rise this quarter, despite declining in February specifically, but the renewed deterioration in the survey-based export indicators points to further weakness in the second …
There was plenty to be encouraged by in the Bank of Canada’s business and consumer surveys, with firms’ sales expectations holding up even as labour and other capacity pressures eased considerably. Wage expectations remain elevated, but the easing of …
3rd April 2023
The strength of GDP growth at the start of the year reflected several temporary factors. The Bank of Canada’s latest quarterly surveys, released next week, will provide a better guide to how firms and consumers are coping with higher interest rates. GDP …
31st March 2023
The strength of GDP growth in January, and probably February too, suggests the Bank of Canada will use its April meeting to reiterate that, despite the recent banking turmoil, it is still prepared to raise interest rates again if needed. The 0.5% m/m rise …
A strong start to the year GDP rose strongly in January and the preliminary estimate points to another healthy gain in February. That strength suggests the Bank of Canada will use its April meeting to reiterate that, despite the recent issues in the US …
Canada’s banks do not face the same immediate risks as those elsewhere. The bank sector is far more concentrated than in the US, limiting the chance that problems at small lenders will trigger a broader crisis of confidence. But the latest area of …
30th March 2023
Overview – The economy made a strong start to 2023, but we continue to expect a moderate recession this year as high interest rates feed through and the banking issues in the US weigh on exports. The downturn will help to pull CPI inflation to 2% by the …
29th March 2023
The 2023 Budget projects a much larger deficit than the prior Fall Economic Statement and, as a result, the government now agrees with our forecast that the debt-to-GDP ratio will rise. Roughly half of the hit to the budget projection is due to weaker …
28th March 2023
Despite the news this week that the population surged by more than one million last year, weak new home sales imply that construction activity will soon fall. That raises the pressure on the government to boost home supply, but there has been little word …
24th March 2023
Consumer spending made a strong start to the year The large rise in retail sales volumes in January and the even bigger increase in sales at food service & drinking places imply that household consumption rose strongly at the start of the year. Spending …
Bank likely to be feeling more confident about inflation outlook The latest Summary of Deliberations reveals that the Bank of Canada is not overly concerned by signs of sticky core inflation elsewhere, but the Bank still needs to see more evidence of …
22nd March 2023
Another reason for the Bank to maintain its pause In case the turmoil in the global banking sector left any doubt, the sharper-than-expected fall in headline CPI inflation in February suggests there is little chance that the Bank of Canada will be forced …
21st March 2023
Another reason for the Bank to maintain its pause In case the turmoil in the global banking sector left any doubt, the sharper-than-expected decline in headline CPI inflation in February suggests there is little chance that the Bank of Canada will be …
While the Credit Suisse rescue might draw a line under that particular institution’s problems, it is clear that confidence in the financial sector overall is still extremely fragile. So regardless of whether more financial institutions run into trouble, …
20th March 2023
The fixed payment structure of most variable rate mortgages has cushioned households from the impact of high interest rates so far, with the data this week confirming that debt service costs remained low last quarter. But that only delays the pain in …
17th March 2023
Tentative signs of stabilisation, but risks abound House prices fell at a slower pace in February and the sharp improvement in the sales-to-new listing ratio offers some hope that they will soon stabilise. While the turmoil in the global banking sector …
15th March 2023
The Canadian banking sector is heavily concentrated, reducing the risk that deposit runs at small lenders might trigger a broader crisis of confidence for the entire sector. As things stand, the chance of the Bank of Canada soon cutting interest rates – …
14th March 2023
Strong start to the year but risks on the horizon The manufacturing sector made a stellar start to 2023, but the surveys suggest growth will soon slow and the banking sector problems in the US could weigh on manufacturing demand over the rest of the year. …
Despite the renewed hawkishness of central bankers elsewhere, the speech that followed the Bank of Canada’s policy announcement this week suggests that the bar to resume rate hikes remains high. Bank still comfortable with its “conditional pause” The …
10th March 2023
Hours worked rise strongly despite employment slowdown Employment growth slowed sharply in February but the rise in hours worked suggests that the economy performed well last month. With the low unemployment rate putting upward pressure on wage growth, …
The Bank of Canada kept its policy rate unchanged at 4.5% today as expected but, with one eye on the strength of the recent US data and the Fed’s hawkish reaction to that, it sounded less confident that it could maintain the conditional pause in rates …
8th March 2023
Policy unchanged, but Bank leaves the door open to future hikes There were no surprises from the Bank of Canada today as it kept the policy rate unchanged at 4.5%, as it previously hinted it would, and reiterated that it is still prepared to resume …
