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business week ahead


  • Expect Bank of Canada to hold
  • Netflix, U.S. banks, DavidsTea in focus
  • China to report GDP
  • What to expect on inflation 

Some analysts expect the Bank of Canada to raise its benchmark interest rate again this week, but it’s more likely that governor Stephen Poloz and his colleagues will sit this one out.

From the state of Canada’s housing market to the still-uncertain fate of the North American free-trade agreement, enough uncertainty remains.

Which is why several observers believe the central bank will hold its overnight rate at 1.25 per cent when it announces its decision and releases its monetary policy report Wednesday.

“There are still a number of uncertainties clouding the outlook for the Canadian economy,” said Toronto-Dominion Bank economist Dina Ignjatovic.

“NAFTA renegotiations and the threat of a global trade war top the list of external threats, while the impact of higher interest rates and policy changes on the housing market and minimum wage hikes loom on the domestic front,” she added in a lookahead to the decision.

“All told, the Bank of Canada will have to balance the positive data points against these downside risks. We suspect that the bank will remain on hold [this] week, with the next hike unlikely to come before the summer.”

But others don’t agree.

“We expect the Bank of Canada (BoC) to raise interest rates at its April meeting by 25 basis points, to 1.5 per cent,” said Morgan Stanley economist Robert Rosener.

“Data on economic activity have thus far come broadly in line with the BoC’s expectations, opening a window for the governing council to deliver a second rate hike this year,” he added.

“We expect the data will soon begin to disappoint relative the BoC’s expectations and, as such, we look for the BoC to pause on hikes thereafter in order to assess the effects of policy tightening, and we continue to expect no further rate hikes until next year.”

Bank of Canada senior deputy governor Carolyn Wilkins and governor Stephen PolozThe Canadian Press

It’s really a question of when, not if.

The case for a Wednesday rate hike includes the most recent Bank of Canada business outlook survey, which found notable optimism and which the central bank watches closely.

Also, “unemployment is historically low, inflation is rising, and the Fed hiked rates in March,” said Moody’s Analytics economist Paul Matsiras, who, like Mr. Rosener, expects a Wednesday increase.

But arguing against a hike are slower economic growth, the impact of earlier increases and new mortgage-qualification rules, and the central bank’s monitoring of how debt-burdened households are adjusting.

Add to that the fact that, while Canada, the United States and Mexico are making nice at the NAFTA bargaining table, we all know it ain’t over till it’s over.

As for the monetary policy report and statement, the central bank has to make some changes to its outlook given the economic climate.

“Although Q1 real GDP growth is tracking around 1.4 per cent, meaningfully below the BoC’s estimate of 2.5 per cent in January, we see only minor cosmetic changes to the BoC’s overall projections in the monetary policy report,” said Brett Ryan, Deutsche Bank’s senior U.S. economist. “At the same time, further deterioration in the housing sector and the potential spillover effects on consumer spending likely keep the BoC cautious with respect to the forward guidance language.”


Here’s the rest of the calendar, best read with your morning coffee. Or tea.


All eyes will be on Netflix Inc.‘s first-quarter results given the recent hit to tech stocks.

Bloomberg numbers put the average estimate for revenue at almost US$3.7-billion and for subscriber growth of 1.4 million in the United States and 5 million globally.

Investors will also be watching for a report on March U.S. retail sales, which economists expect to show an increase of about 0.3 to 0.5 per cent from February.

Watch, too, as the major U.S. banks continue to roll out quarterly results, including, today, Bank of America Corp, after earnings last week showed strong gains from its peers.

Earnings reports, in general, pick up this week.

“Importantly in the U.S., earnings expectations have held up well during the correction, with Q1 profit growth expected to come in around 18 per cent year over year for the S&P 500, and a still-strong 16 per cent excluding the rebound in the energy sector based on Thomson Reuters’ bottom-up tally,” said Bank of Montreal senior economist Robert Kavcic.

Aphria Inc, the Canadian marijuana company, also reports results. If that’s your morning thing.


United Continental Holdings Inc. releases quarterly results, as do Goldman Sachs Group Inc., IBM, CSX Corp. and Johnson and Johnson.

And, of course, we’ll want to see what Kinder Morgan Inc. has to say when it reports earnings, given its threat to kill the expansion of the Trans Mountain pipeline.

Statistics Canada, meanwhile, releases its monthly look at manufacturing sales, which economists expect will show an increase of about 0.6 per cent in February from January.

Markets will also be watching for several Chinese indicators, including first-quarter economic growth.

“Our own measure ... suggests that economic growth weakened from around 5.2 per cent year over year in Q4 to a preliminary estimate of 4.9 per cent in Q1, with slower trade and property construction offsetting a rebound in industry,” said Chang Liu of Capital Economics.

“However, we expect the official figures to show only a very small slowdown in Q1, from 6.8 per cent year over year to 6.7 per cent year over year, with the breakdown linking it to weaker activity in services.”


Besides the Bank of Canada, Wednesday brings the second of three British indicators. The first, on Tuesday, is expected to show unemployment holding steady at 4.3 per cent.

Wednesday’s reading on annual inflation in March is expected to mark a slower pace of 2.6 per cent, but “the earlier timing of the Easter holiday probably distorted the figures,” said Liam Peach of Capital Economics, adding that Thursday’s look at retail sales “should reveal that the heavy snowfall in March hit the sector hard, with sales volumes contracting sharply on the month.”

Wednesday also brings the latest trade numbers from Japan, the Federal Reserve’s Beige Book of regional economic conditions and quarterly results from Alcoa Inc., American Express Co., Canadian Pacific Railway Ltd., Celestica Inc., Morgan Stanley, Roots Corp. and U.S. Bancorp.


The tea’s for you. The sympathy is for shareholders of DavidsTea Inc., which releases its results Thursday.

Some other earnings, too: Bank of New York Mellon, Phillip Morris International Inc., Rogers Communications Inc. and The Blackstone Group LP.


BMO expects the Statistics Canada report to show consumer prices climbed 0.4 per cent in March from February, with the annual inflation rate rising to a six-year high of 2.4 per cent.

“Unlike in February, energy prices were mostly higher in the month, with gasoline climbing about 3 per cent, which will contribute to the anticipated solid headline,” said Benjamin Reitzes, BMO’s Canadian rates and macro strategist.

“Clothing and recreation are the other sectors that look to see chunky increases, while a drop in new home prices will restrain the shelter component.”

Statistics Canada also reports on March retail sales, expected to show a gain of 0.5 per cent.

We’ll get quarterly results from Baker Hughes, Honeywell International Inc. and Procter & Gamble Inc., among others.

And finance ministers and central bankers from the G20 group of countries meet in Washington, where, presumably, they’ll get a better cup of coffee.