1 Jul 2015
Soft Canadian GDP increases the likelihood of another rate cut – Nomura
FXStreet (Barcelona) - Charles St-Arnaud, Economist at Nomura, believes that the continued weakness in Canadian economic data and yesterday’s monthly GDP print suggests further easing might be seen by the Bank of Canada.
Key Quotes
“Monthly GDP declined 0.1% m-o-m in April, weaker than expectations. This is the fifth decline in six months. The goods-producing side of the economy fell by 0.8% on the month. The weakness came mainly from another strong decline in the mining, oil and gas sector (-2.6% m-o-m), while there were also some falls in utilities (-0.7% m-o-m), manufacturing (-0.2% m-o-m) and construction (-0.1% m-o-m).”
“On the flip side, the services sector increased by 0.3% m-o-m, mainly owing to wholesale (+1.6% m-om), education (+0.5% m-o-m), accommodation and food services (+1.2% m-o-m) and real estate (+0.6% m-o-m), while there were declines in the finance sector (-0.6% m-o-m) and retail trade (-0.2% m-o-m).”
“Overall, this is a negative report and shows the resource sector remains a drag on growth. This will likely continue to be the case in May and June especially because of the production shutdowns owing to the wildfires in Alberta that cut oil sands production by about 10%. With today's number and continued expected weakness in May and June, Q2 is very likely to be negative, currently tracking about -0.5% q-o-q ar.”
“We continue to believe the BoC will leave rates unchanged this year, but with continued weakness, the likelihood of another cut has increased. The most important release ahead of the July BoC meeting will be the trade data on 7 July.”
Key Quotes
“Monthly GDP declined 0.1% m-o-m in April, weaker than expectations. This is the fifth decline in six months. The goods-producing side of the economy fell by 0.8% on the month. The weakness came mainly from another strong decline in the mining, oil and gas sector (-2.6% m-o-m), while there were also some falls in utilities (-0.7% m-o-m), manufacturing (-0.2% m-o-m) and construction (-0.1% m-o-m).”
“On the flip side, the services sector increased by 0.3% m-o-m, mainly owing to wholesale (+1.6% m-om), education (+0.5% m-o-m), accommodation and food services (+1.2% m-o-m) and real estate (+0.6% m-o-m), while there were declines in the finance sector (-0.6% m-o-m) and retail trade (-0.2% m-o-m).”
“Overall, this is a negative report and shows the resource sector remains a drag on growth. This will likely continue to be the case in May and June especially because of the production shutdowns owing to the wildfires in Alberta that cut oil sands production by about 10%. With today's number and continued expected weakness in May and June, Q2 is very likely to be negative, currently tracking about -0.5% q-o-q ar.”
“We continue to believe the BoC will leave rates unchanged this year, but with continued weakness, the likelihood of another cut has increased. The most important release ahead of the July BoC meeting will be the trade data on 7 July.”