Hungry for Canadian economic indicators? Prepare for a feast

Share

Put on your analytical stretchy pants, Canadians. The country has an economic smorgasbord laid out ahead of it this week, with heavy helpings of high-calorie indicators to dig into.

In any given week, most economic gourmets would be sated by any one of a quarterly gross domestic product report, a central bank rate decision, monthly employment data or new international trade numbers. This week, we have them all. By the time we're done digesting them, we'll have a better taste for the state of Canada's uncertain economy.

The fun starts Tuesday, with Statistics Canada's third-quarter GDP report. This has been widely touted as the turnaround quarter for the Canadian economy, after two successive quarters of small contractions to start the year. The consensus estimate among economists is for growth of a healthy 2.4 per cent on an annualized basis.

But some less-than-stellar indicators for September that came out earlier this month, on such things as manufacturing, wholesale trade and retail sales, suggested downside risk to that estimate. Economists expect September's month-to-month GDP to show little or no growth.

"Business investment is anticipated to be a source of significant weakness for a third straight quarter, as the impact of the precipitous drop in oil prices continues to work its way through the economy," Benjamin Reitzes, senior economist at Bank of Montreal, said in a research report. "Consumer spending was decent once again, but is showing signs of ebbing momentum, which isn't surprising given debt levels and the soft economic backdrop."

The weak end to the third quarter suggests a loss of momentum in the fourth quarter, especially with oil prices continuing to flounder, weighing on the already battered resource sector.

"Crude prices have gone lower – and for longer – than anticipated, and cuts in oil and gas investment aren't likely to be over," Canadian Imperial Bank of Commerce economist Nick Exarhos wrote in a research note. "There's reason to believe that the fourth quarter will end the year with a whimper."

The Bank of Canada will get a look at that third-quarter GDP numbers before it announces its interest-rate decision on Wednesday morning. But the GDP report comes so late in the game for the central bank that it would have to be a massive shocker for the bank to start redrafting the statement it releases along with its rate decision, let alone change the decision itself.

Market participants see a near certainty that the Bank of Canada will hold its key rate steady at 0.5 per cent, following two quarter-percentage-point cuts earlier in the year. But central bank watchers will be eyeing the text of the statement very closely to see whether the bank is getting increasingly worried about the prolonged weakness in the oil market and the apparent slowing of the economy into the fourth quarter. Especially, they will be looking for any indication of a change in the bank's outlook for the economy to return to full capacity, which the bank pegged at mid-2017; any erosion of that target could signal the possibility of further interest rate cuts to come.

As this week's rate announcement doesn't coincide with one of the Bank of Canada's quarterly Monetary Policy Reports, it won't be accompanied by a press conference with bank Governor Stephen Poloz – meaning the brief statement, typically only a few paragraphs long, is all we'll get from the bank in terms of its view of the economic landscape. However, the bank will be more talkative in the next couple of weeks, as Mr. Poloz is scheduled to give a speech Dec. 8 and the bank releases its semi-annual Financial System Review on Dec. 15. Mr. Poloz will hold press conferences following both events.

The bank also won't get a chance to see the latest data for two key economic factors on its radar – jobs and trade – until two days after the rate decision.

Economists say Statscan's Labour Force Survey for November could show a small decline, after the big 44,000-job surge in October, which was largely due to government hiring of temporary staff for the Oct. 19 federal election.

"With the anticipated job losses expected to be election-related, part-time employment will likely bear the brunt of the weakness," BMO's Mr. Reitzes said. "Manufacturing will be watched closely as well to see if it can build on the modest gains of the prior two months."

Economists expect Canada's merchandise trade deficit held steady at about $1.7-billion in October, as weakness in the Canadian dollar is believed to have largely offset declines in the price for oil exports. But they expect both exports and imports to show modest declines – evidence of sluggishness in Canada's economy.

"After likely adding very strongly to third-quarter GDP growth, trade will probably be much less positive for the fourth quarter," Mr. Reitzes said.