Canada: Industry level GDP should rise by 0.3% in May – TDS
|Analysts at TDS expect Canada’s industry level GDP to rise by 0.3% in May and growth to reflect strength in both goods and services, though each should receive significant support from motor vehicles.
Key Quotes
“Manufacturing output surged in May on the strength of motor vehicle shipments and auto sales contributed nearly all the growth in nominal retail sales. Wholesale sales were also robust and showed a broad increase in activity. Meanwhile, a sharp cooling in the Toronto housing market should provide an offset through the conduit of residential construction and broker commissions, though the latter is admittedly a small portion of the wider industry. With the headwinds from real estate likely to persist into Q3 and consumer spending unlikely to repeat its blockbuster performance, we may be at the peak of the current cycle. Our forecast for a 0.3% monthly print translates into 4.2% advance on a year-ago basis, though base-effects from the Fort McMurray wildfires are sizeable. However, downward revisions to a number of April data releases introduce a material risk that GDP is revised lower for the month, which could lead to a disappointment on year-ago growth.”
“With Q2 GDP tracking near a 3.2% pace, the real side of the economy is performing in line with the Bank of Canada's expectations from the July MPR, signaling a high likelihood for a 25bp hike in October.”
“Foreign Exchange
A slightly above consensus expectation should keep the CAD trading on its front foot. USDCAD has already tested through the key 1.2450/61 pivot, but has been reluctant to trade through the figure below. From our vantage point, we spot support in the 1.2370/80 area where the 200-wma lies, which we expect to hold as much of the good news is already in the price. Further, several USD-pairs are trading near technical extremes, but without a US fundamental catalyst we think these levels should be respected. As such, the onus will be on the USD-leg to drive a sustained move and that trigger remains absent at this time. A negative GDP surprise will do more to undermine the CAD but losses should be contained towards 1.2550/1.2600 as it is unlikely to derail the BoC from its next hike.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.