Canada: A test of fiscal stimulus – Scotiabank

Derek Holt, Research Analyst at Scotiabank, suggests that this week is likely to bring with it a significant stimulus test that could advance the debate over whether Ottawa’s fiscal policy initiatives are insulating against greater growth downsides or not.

Key Quotes

“It will not be a definitive test by any means, not least of which because the timing of the stimulus effects on actual spending is highly uncertain.”

“I’m referring to retail sales when September’s print gets released on Tuesday and how they follow the arrival of much higher child benefit payments that began getting mailed out or deposited in later July. It was unrealistic to have expected these cheques to immediately impact August retail sales. In fact, Q3 tracking is pointing toward a small annualized 1.1% q/q decline in retail sales volumes before we get September’s numbers. It may continue to be unrealistic to expect the child benefit cheques/transfers to be spent in September. But this is slow-fuse stimulus that, once it reaches a critical mass, noticeably impacts consumer cash flows.”

“Also note that Statistics Canada will begin to include a monthly measure of on-line retail sales of Canadian-based retailers with this report for September.”