Canadian Monthly GDP – September 30, 2015

The Canadian economy grew faster than expected in July with output expanding by 0.3 per cent on a monthly basis. Growth in real GDP, as measured at the industry level, was led by gains in the mining, oil and gas sectors as well as rising output in the manufacturing and finance and insurance sectors. 

Solid economic growth in July comes on the heels of very strong growth in June and generally encouraging economic data since the beginning of summer. July’s GDP data also signals a high likelihood that third quarter economic growth will not just be positive, therefore breaking a string of two straight down quarters, but will register a fairly robust 2.5 per cent. 

For more information, please contact:  Gino Pezzani.

Canadian Retail Sales in recovering- September 23, 2015

In a further sign that the Canadian economy is recovering, Canadian retail sales rose 0.5 per cent in July, the third consecutive monthly increase. On a year-over-year basis, sales were up 1.8 per cent. Retail sales were higher in 6 of 11 retail sub-sectors with sales of motor vehicles and clothing leading the way. In BC, retail sales dipped 0.4 per cent on a monthly basis but were up 5.7 per cent compared to July 2014.

Consumer spending continues to be the main driver of economic growth in Canada, though weakness in the loonie is helping export growth. Canadian real GDP is currently tracking at between 2 and 2.5 per cent in the third quarter which would mean an end to the “technical” recession experienced over the first half of the year.

For more information, please contact: Gino Pezzani.

Canadian Consumer Price Inflation – September 18, 2015

The Consumer Price Index (CPI) rose 1.3 per cent in the 12-months to August, matching the increase from July. Inflation continues to be pinned down by lower energy prices with gasoline prices falling 12.6 per cent year-over-year. Inflation measured by the Bank of Canada’s core CPI index, which excludes fuel, food and other volatile components, registered 2.1 per cent. This is the 13th consecutive month that core inflation has been above the Bank’s 2 per cent inflation target. Inflation in BC was up 1.2 per cent in the 12-months to August and is tracking at just 0.8 per cent for all of 2015. 

For more information, please contact:  Gino Pezzani.

US Federal Reserve Interest Rate Decision – September 17, 2015

The US Federal Reserve (“the Fed”) opted to leave its key interest rate unchanged at its current level of between zero and 0.25 per cent. In its accompanying statement, the Fed cited slowing global economic growth and continued low inflation as key factors in its decision. The Fed further noted that it will be appropriate to raise its target rate once it sees further improvement in the labour market and once it is convinced that inflation is on track to reach its 2 per cent objective over the medium term.

Focus will now shift to the Fed’s remaining 2015 meetings in October and December. Whether the Fed chooses to act on rates this year or next, historically the correlation between Canadian and US long-term interest rates is very strong, even at times such as now when the two countries’ normally in sync monetary policy is heading in different directions. Therefore, as the Fed eventually moves to increase its target rate, there will likely be some upward pressure on 5-year interest rates in Canada. When paired with a recovering Canadian economy, this will likely translate to higher fixed mortgage rates by the middle of next year.

For more information, please contact:  Gino Pezzani.

Canadian Manufacturing Sales – September 16, 2015

Canadian manufacturing rose for the third time in as many months, increasing 1.7 per cent on a monthly basis in July. Sales were led by higher shipments of motor vehicle parts, which accounted for close to two-thirds of the gain. Overall, sales were higher in 12 of 21 Canadian manufacturing sub-sectors. In BC, where the manufacturing sector employs roughly 170,000 people, sales rose 0.5 per cent on a monthly basis and were up 2 per cent year-over-year.

Solid manufacturing data in July is strong evidence that the Canadian economy is recovering from the shock of low oil prices, particularly in sectors helped by the weaker Canadian dollar. We expect that the recovery will continue into the third and fourth quarter with the Canadian economy eking out modest growth of about 1.1 per cent this year. Meanwhile, the BC economy continues to set the pace for Canada and remains on track to post the highest economic growth of any province in 2015.

For more information, please contact:  Gino Pezzani.