Week Ahead Canada Digest – TDS

Analysts at TD Securities offered a brief preview of important Canadian macro releases scheduled through the course of this week.

Key Quotes:

“ Markets will remain focused on coronavirus developments, especially with the central bank calendar shifting into a lower gear. Top-tier event risk is provided by Friday's employment reports, with TD below consensus for jobs in both Canada and the US. We will also receive ISM Manufacturing for January alongside Markit Manufacturing PMI in Canada, while Wednesday's international trade report will round out the data calendar. Lastly, Senior Deputy Governor Wilkins will speak about Central Banking in a Slow-Growth World on Wednesday, although we do not expect much focus on the near-term policy outlook.”

“TD looks for the international merchandise trade deficit to narrow to a modest $100m in December, down from $1.1bn in the prior month, owing to a sharp increase in nominal energy exports. Crude oil prices rose by ~5% m/m in December, which alongside a pickup in real energy shipments should provide the driving force for total exports with motor vehicles exports expected to see little change. Elsewhere, CN Rail's return to normal operations should provide a modest tailwind after labour disruptions weighed on rail traffic during the month of November. On the other side of the ledger, we expect a more muted performance for imports owing to soft domestic demand and a poor reading on advance US exports.”

“The Canadian labour market is expected to begin 2020 on a subdued note, with employment forecast to rise by 10k in January on the heels of a (downwardly revised) 27k increase for December. Even though the Bank's Business Outlook Survey showed solid hiring intentions in Q4, the balance of opinion for small businesses has started to deteriorate. Job growth of 10k is consistent with the current six-month trend (12k) and we look for full-time positions to lead the advance given the persistence of labour shortages. More subdued job growth alongside an expected rebound in the labour force (-21k in Dec) will put upward pressure on the unemployment rate, which we expect to rise to 5.7%, while base-effects should result in a deceleration in wage growth to 3.6% y/y.”