I wonder whether Bank of Canada Governor Stephen Poloz regretted the word "atrocious" the moment it left his lips. It's the kind of word that can linger over a central banker long after the reason behind it is forgotten, like an unwelcome scent left over from a meticulously spiced meal.
In an interview with the Financial Times in London published early this week, the occasionally too-candid-for-his-own-good Governor described the Canadian economy in the just-ended first quarter of the year as "atrocious."
The rest of the interview was pretty mundane, going over ground that Canadian readers were doubtless familiar with: the oil shock, the logic behind the bank's surprise January rate cut, the confidence that non-energy export growth would lift the economy out of this first-quarter funk. Mr. Poloz was basically bringing the British business audience up to speed on old news.
But guess what stuck?
"Atrocious" was in the Financial Times headline. It was in the Canadian headlines that reported on the FT interview (including The Globe and Mail's). Bay Street economists quickly latched on to it in their economic research reports. The opposition parties in Ottawa made political hay of it, questioning the economic stewardship of the Harper Conservatives.
It quickly took on a life of its own as a Canadian economic buzzword. We can expect it to keep resurfacing as we watch the first-quarter economic indicators unfold, and wonder how the central bank is interpreting the data.
Mr. Poloz is going to wear this one for a while. And it will almost certainly have more of an impact than he intended in uttering the word.
Not that it was an entirely meaningless adjective that the Governor pulled out of his vocabulary. He knows what it means. It underlines his expectation, as he said in a press conference in London last week, that "it's going to be a pretty low-growth quarter."
But was "atrocious" meant to signal that we should be prepared for first-quarter numbers that are worse than "pretty low growth"? That, for many, is the key question. It's also, almost certainly, the wrong one.
For argument's sake, let's just say Mr. Poloz wanted to publicly communicate a serious deterioration in his view of the Canadian economy. Would he rely on the casual dropping of a single ill-defined word in an interview with a foreign newspaper to do it? Certainly not.
No, more likely this was another case of Poloz being Poloz.
It's a colourful descriptor uttered by a central banker who, unlike his predecessors and most of his peers, is fond of and prone to colourful descriptors. It sometimes gets him into dicey territory, and causes his communications staff some grey hairs.
But this is also a central banker who has shelved direct policy guidance in favour of communicating the bank's assessment of risks. The markets have had some trouble wrapping their brains around this, but what it means is you can't treat every word or phrase out of this guy's mouth as an indirect form of guidance. It's not.
The central bank is certainly not prepared to quantify "atrocious" until April 15, when it updates its official estimates in its quarterly Monetary Policy Report. But let's consider what we can quantify.
January gross domestic product data, released earlier this week, showed the economy contracted by 0.1 per cent month over month – certainly heading in the wrong direction, but not calamitously so. However, if February GDP repeats the January result – and many economists think it might – that could put us into territory for which "atrocious" might start to look fitting.
And if this episode left you wondering whether Mr. Poloz knows some things about the economy that you don't, the truth is he does. The central bank is putting the finishing touches on its quarterly Business Outlook Survey – it will be released next Monday – and it's a good bet that Mr. Poloz will have had a preview of the results. (The bank completed conducting the survey about three weeks ago.) Perhaps this key gauge of the recent mood of the business community, and its expressed willingness to spend, hire and invest, are colouring Mr. Poloz's choice of adjectives.
But we should also keep in mind that the first quarter, no matter what adjectives or statistics we use to describe it, is now in the rear-view mirror. Much more important is what will happen in the second quarter and beyond. It matters much more if Mr. Poloz starts adjusting his outlook for a second-quarter rebound from a front-loaded oil hit, and an export-led acceleration of the economy in the second half. And, so far, nothing he has said even hints at a change of thinking on that front.
For his own sake if nothing else, Mr. Poloz might want to go easy on the adjective bombs in uncertain economic times. But central bank followers also have to wean themselves off treating every word as a clue. That's not the way this guy operates. Get used to it.