Investment in Canada
Canada - Investment
GDP growth moderates in Q1; fundamentals remain solid
Canada’s economy began the year at a slightly slower pace, with seasonally-adjusted annualized (SAAR) growth coming in at 1.3% from a quarter earlier in the first quarter. This was down from the 1.7% SAAR expansion in the fourth quarter last year, roughly matching the Bank of Canada’s growth forecasts but below analysts’ expectations of a firmer 1.8% SAAR gain. Weaker growth in the first quarter came amid ongoing turmoil in the housing market and a cool-off in exports. Behind the modest print were, however, a number of reasons for optimism; despite slower output growth, incomes held up. Moreover, business investment—which only rebounded a few quarters ago following years of sluggishness—posted solid gains in the quarter.
Domestic demand eased from the fourth quarter, growing at 2.1% SAAR from a quarter earlier (Q4 2017: +4.1% SAAR) on across-the-board downgrades. Growth in household spending halved, coming in at 1.1% SAAR (Q4 2017: +2.2% SAAR) as highly-indebted consumers felt the increasing pain of higher interest rates. Furthermore, growth in public spending also slowed (Q1: +2.7% SAAR; Q4 2017: +3.8% SAAR). Meanwhile, although fixed investment eased in the quarter (Q1: +3.9% SAAR; Q4 2017: +9.5% SAAR) on weaker residential outlays as new mortgage-lending rules came into effect, business investment continued to accelerate as firms hiked machinery and equipment outlays. Inventories continued to accumulate at roughly the same pace as in the fourth quarter.
Brian DePratto, Senior Economist at TD Economics, stated, “The writing was on the wall for international trade, but the final figures were not as bad as might have been expected.” Despite stumbling out of the gate, exports still posted modest growth from a quarter earlier (Q1: +1.7% SAAR; Q4 2017: +3.9% SAAR) and impressed to the upside as fears of transportation bottlenecks were ultimately overblown. That said, shipments of refined energy products plummeted from a quarter earlier. Imports, meanwhile, slowed to 4.9% SAAR (Q4 2017: +7.7% SAAR) growth. All told, the external sector again dragged on growth in the quarter, subtracting 1.1 percentage points from the headline reading (Q4 2017: minus 1.2 percentage points).
On an annual basis, economic growth moderated to 2.3% in the first quarter (Q4 2017: +3.0% year-on-year).
Commenting further on the first-quarter outturn, Mr. DePratto of TD Economics added:
“This is another 'more than meets the eye' national accounts report. Beneath modest headline growth were some relatively encouraging details. What's more, even the weak spots in today's report shouldn't last. The poor performance of housing was confined to the resale market, [which] can be attributed by and large to the B-20 mortgage underwriting changes implemented on 1 January—the worst impacts of which are likely behind us. On the trade front, fog continues to hang over the horizon, but the robust U.S. growth outlook provides a decent backdrop going forward [and suggests] the sector should at least cease to be a drag on growth. The bottom line is that the Canadian economy clearly still has some gas left in the tank.”
The second half of last year saw economic growth tick down towards potential, and the Bank of Canada expects the economy to grow roughly around that pace over the coming years, forecasting growth of 2.0% in 2018 and 2.1% in 2019. Met the why particular Consensus Forecast panelists expect growth of 2.2% in 2018, which is unchanged from last month’s forecast. For 2019, our panelists expect growth to edge down to 1.8%.
Canada - Investment Data
|Investment (annual variation in %)||0.3||1.6||-4.5||-1.9||3.0|
5 years of economic forecasts for more than 30 economic indicators.
|Bond Yield||2.16||1.00 %||Jul 12|
|Exchange Rate||1.32||0.15 %||Jul 13|
|Stock Market||16,561||0.23 %||Jul 13|
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June 22, 2018
Seasonally-adjusted consumer prices rose 0.1% from a month earlier in May, matching April’s 0.1% increase.
June 13, 2018
House prices rose 1.0% on a monthly basis in May as the Teranet-National Bank National Composite House Price Index ticked higher, accelerating from April’s 0.2% month-on-month increase.
June 8, 2018
Housing starts on a seasonally-adjusted annualized (SAAR) basis plummeted to 195,600 units in May, according to the Canada Mortgage and Housing Corporation (CMHC).
June 6, 2018
In May, the Ivey Purchasing Managers Index (PMI), prepared by the Richard Ivey School of Business, dipped 9.0 points from April’s multi-year high to land at 62.5 points.
May 30, 2018
On 30 May, the Bank of Canada (BoC) left its target for the overnight rate unchanged at 1.25%, as broadly expected by market analysts.