Canada: May GDP figure to remain close to 0.2% - ING
|James Knightley, Chief International Economist at ING, suggests that the future hawkishness of the BoC depends on the strength of Canada’s economic data, part of which is being revealed in today’s May GDP (MoM) release.
Key Quotes
“July’s central bank policy meeting saw a shift in the BoC’s stance, where the overnight rate was increased to 75bp, following strong 1Q17 growth of 3.7%. To date, the growth has been very broad-based, with April’s MoM GDP growth coming from 14 out of 20 sectors. Despite inflation not reflecting this buoyant outlook, it is expected to catch up by mid-2018 and hence is not a reason for restraint for the Bank.”
“Several May MoM releases that are likely to play a part in today’s figure include retail sales, which did better than expected growing 0.6% (0.3% expected), showing the positive Canadian retail flowing well into 2Q, manufacturing sales which remained the same as April’s at 1.1%, industrial production which slowed from +0.6% to -0.2% and international merchandise trade which fell from -C$0.37bn to -C$1.09bn. These numbers have led us to believe that May’s GDP MoM figure will remain close to its previous figure of 0.2%.”
“A positive growth figure combined with the BoC continuing to be very forward looking, with them anticipating an inflation pick-up and a continued buoyant labour market, means that we expect the BoC to raise rates once more this year with another 4 hikes looking possible for next year. However, these are likely to be done cautiously due to the uncertainty regarding Trump’s trade plans and the need to balance high household debt of C$1.67 per C$1 and booming house prices.”
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