Canada: Strong growth indicators - AmpGFX

The First quarter was very strong for Canada, and they are already forecasting some moderation in the rest of the year while the economic indicators started Q2 on a firm footing, according to analysts at Amplifying Global FX Capital.

Key Quotes

“Retail sales have been rising strongly, up 7.0%y/y in April.  However, consumer confidence peaked in April and has eased in recent months, albeit at above the 50 neutral level, it is still solid.”

“Business surveys are solid, but reached recent peaks around April/May, and have ebbed recently.  The CFIB business barometer index fell significantly from 66.05 in May to 60.9 in June, a low since January.”

“The Markit Canada manufacturing PMI peaked at 55.9 in April and fell to 55.1 in May, the June data is due on 4 July.”

“The Bank of Canada holds stock in its own quarterly survey of business conditions.  The Q2 results are released on 30 June. In Q1, investment intentions were at a high since 2010.  Employment intentions were at a high since Q3-2014.  Future sales expectations dipped to a moderate level.  The data are consistent with the economy having completed the adjustment to the oil price shock in 2014/2015.”

“Resurgent house prices

A factor that may be encouraging the Bank of Canada to remove policy accommodation is a resurgence in house price growth.  The nationwide existing home price index rose to a new peak rate of annual inflation (13.9%y/y in May) with broadening priced appreciation across the country.  The new home price index also rose to a new peak inflation rate of 3.9%y/y in April

However, while prices are up, building permits were down significantly in March and April to the lowest level since July last year, and home sales were down for two months in March (-1.7%m/m) and April (-6.2%m/m).”

“Employment growth strong

Employment growth has picked up sharply since mid-last year, rising at a strong rate of 1.8%y/y in May.  However, total hours worked (discussed in the April MPR) has grown more modestly; little changed since March at +0.7%y/y.

The unemployment rate was 6.6% in May, around its post-financial crisis low.  Apart from the pre-crisis years, this is historically low for Canada.”