Whither the economy
The Bank of Canada is painting a mixed picture of an economy whacked by the oil shock but buoyed by consumer spending and a stronger America.
Which leads to the question: Are we climbing out of this funk or not?
The answer, economists say, is maybe.
“With the third quarter looking headed for nearly 3-per-cent growth, the next BoC meeting should similarly be non-eventful,” CIBC World Markets chief economist Avery Shenfeld said after the central bank held its benchmark rate steady at 0.5 per cent today.
“But we’ll need some evidence that the economy is still growing in Q4 before markets are likely to price out all risks of another rate cut in Canada.”
Canada’s economy contracted in each of the first two quarters, and economists now project annual economic growth of just about 1 per cent, weak by any standards.
But the evidence so far suggests a stronger third quarter, as Mr. Shenfeld noted.
As the Bank of Canada sees it, the crucial energy sector is still adjusting to the oil crash, and some of that is spilling into the broader economy.
“These adjustments are complex and are expected to take considerable time,” the central bank said in today’s statement.
“Economic activity continues to be underpinned by solid household spending and a firm recovery in the United States, with particular strength in the sectors of the U.S. economy that are important for Canadian exports.”
This all suggests that Bank of Canada Governor Stephen Poloz and his colleagues are going to remain easy for some time yet while they watch events play out.
But it was certainly a better statement than expected.
“One month can make a huge difference in monetary policy,” said Paul-André Pinsonnault and Krishen Rangasamy of National Bank.
“The Bank of Canada’s tone was indeed much less alarmist this time round,” they added.
“The sharp rebound in U.S. economic activity and stronger Canadian exports seem to have given encouragement to Mr. Poloz, who is also taking credit for earlier rate cuts which he thinks ‘are working their way through the Canadian economy.’”
While economists see a much better third quarter, they’re not ruling out another rate cut down the road just yet.
A scene I'd love to see
“1 million child-care spaces and a balanced budget.”
Quebecor in deal
Quebecor Inc. has announced a $500-million deal to buy back 29 per cent of the remaining interest it does not own in its main subsidiary, Quebecor Media Inc., The Globe and Mail’s Christine Dobby reports.
The company said it has purchased for cancellation 7.3 million of the shares owned by the Caisse de dépôt et placement du Québec.
Bombardier, Manulife in focus
Keep your eye on Bombardier and Manulife today, with reports that the former has rejected one deal and the latter is nearing another.
Reuters reports today that Bombardier has rejected a bid by China’s Beijing Infrastructure Investment Co. for its rail unit.
Reuters also reports that Manulife is closing in on an acquisition of Standard Chartered’s Hong Kong pension unit for some $400-million (U.S.).