Canada: Struggling to rebalance – RBC CM

Research Team at RBC Capital Markets, notes that for the last two years, Canada has been slowly adjusting to the end of the commodity supercycle.

Key Quotes

“Investment has been painfully slow to pick up1 but non-commodity exports were showing encouraging signs of improvement. Earlier this year exports surged, driven by non-commodity exports. The BoC has been cautious in its projections: in its April MPR it revised down next year’s contribution to growth from net exports (- 0.3ppt from +0.4) on the back of weaker external demand and a higher assumed level for CAD.

Nevertheless it sees “stronger momentum for Canadian exports” as one of the upside risks to its inflation outlook. Non-commodity exports are expected to “encourage investment” in the non-resource sector “more than offsetting the drag from lower investment in the resource sector”.”