Softening growth, however, is unlikely to prevent the Bank of Canada from another outsized rate hike when it makes its monetary policy decision next week, economists said. Canada’s economy grew at an annual rate of 3.3 percent in the second quarter, Statistics Canada said Wednesday, driven by strong consumer spending and business investment in inventories. That was tempered by a decline in residential spending and a rise in imports relative to exports, which pushed the quarterly GDP result below the Bank of Canada’s forecast for annual growth of 4 percent and the Bay Street consensus of 4 .4 percent growth. Preliminary estimates for July show that GDP fell by 0.1 percent that month. That suggests third-quarter growth is on track to undercut the central bank’s estimate of 2%, year-on-year, and could mark a turning point for the Canadian economy after a period of increased economic activity that accompanied the lifting of the pandemic. limitations. “While GDP growth was solid in the second quarter as a whole, it was weaker than expected and the slow end to the quarter, as well as the soft start to the third quarter, suggest that the economy is reacting more quickly to rising interest rates than what did the Bank of Canada expect. Canadian Imperial Bank of Commerce economist Andrew Grantham said in a note to clients. The central bank has raised interest rates at four consecutive meetings since March, including a full percentage point rate hike in July, the biggest single move since 1998. This campaign to raise borrowing costs is expressly aimed at slowing economic activity in an attempt to tame runaway inflation. While rate hikes may take six to eight quarters to have a full impact, Wednesday’s GDP data shows that higher borrowing costs are already squeezing rate-sensitive sectors such as housing. Housing spending shrank about 28% year-on-year in the quarter. That’s unlikely to push the Bank of Canada off course, private sector economists argue. Governor Tiff Macklem signaled this month that he intends to keep raising interest rates in what economists call “constraint territory,” where borrowing costs act as a drag on economic activity. Financial markets are pricing in a 75 basis point rate hike for the Sept. 7 rate decision, while Bay Street forecasts suggest hikes of 50, 75 or 100 basis points are on the table for next week. (A base unit is one hundredth of a percentage unit.) “Inflation remains the BoE’s 1, 2, 3 and 4 priorities, so we don’t think today’s print will change the bank’s mindset towards the September rate announcement (especially given the strength in household spending),” Toronto-Dominion Bank rate strategists Andrew Kelvin, Robert Both and Chris Whelan wrote in a note to clients. “We continue to look for a 75bp rate hike next week, but the softer move in the third quarter suggests trouble ahead,” they wrote. Looking further ahead, they suggested the central bank may need to slow the pace of rate hikes in October and could opt for a 25 basis point rate hike at that point. Royce Mendes, chief macro strategist at Desjardins Capital Markets, said a 50 basis point rate hike next week is now more likely. “With the Bank of Canada already raising interest rates by 100 basis points in July, central bankers may be willing to slow the pace of hikes ahead of their peers, only pushing rates by 50 basis points next week. It is possible that monetary policymakers will move more than this, but cracks are clearly starting to form in the foundations of the economy,” he wrote in a note to clients. While growth was lower than expected, Canada continues to outperform peers, including the United States where economic activity contracted in the second quarter. Canadian consumer spending remained strong as people bought new clothes and shoes to get back to work at the office, and splurged on travel, restaurants and other services that reopened as pandemic restrictions were lifted. Business spending on inventories also boosted growth in the quarter, with a particularly notable jump in farm inventories. “Increased production of agricultural products in the second quarter, mainly wheat and canola, led to the largest increase in farm inventory investment since 1961, when quarterly data were first recorded,” Statscan said. This was offset by a decline in housing spending and consumer durables spending. Net trade also weighed on GDP in the quarter, with import growth outstripping exports. Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox morning or night. Sign up today.
title: “Canada S Economic Growth Misses Expectations But Unlikely To Prevent Another Big Boc Rate Hike Klmat” ShowToc: true date: “2022-11-30” author: “Leticia Taube”
Softening growth, however, is unlikely to prevent the Bank of Canada from another outsized rate hike when it makes its monetary policy decision next week, economists said. Canada’s economy grew at an annual rate of 3.3 percent in the second quarter, Statistics Canada said Wednesday, driven by strong consumer spending and business investment in inventories. That was tempered by a decline in residential spending and a rise in imports relative to exports, which pushed the quarterly GDP result below the Bank of Canada’s forecast for annual growth of 4 percent and the Bay Street consensus of 4 .4 percent growth. Preliminary estimates for July show that GDP fell by 0.1 percent that month. That suggests third-quarter growth is on track to undercut the central bank’s estimate of 2%, year-on-year, and could mark a turning point for the Canadian economy after a period of increased economic activity that accompanied the lifting of the pandemic. limitations. “While GDP growth was solid in the second quarter as a whole, it was weaker than expected and the slow end to the quarter, as well as the soft start to the third quarter, suggest that the economy is reacting more quickly to rising interest rates than what did the Bank of Canada expect. Canadian Imperial Bank of Commerce economist Andrew Grantham said in a note to clients. The central bank has raised interest rates at four consecutive meetings since March, including a full percentage point rate hike in July, the biggest single move since 1998. This campaign to raise borrowing costs is expressly aimed at slowing economic activity in an attempt to tame runaway inflation. While rate hikes may take six to eight quarters to have a full impact, Wednesday’s GDP data shows that higher borrowing costs are already squeezing rate-sensitive sectors such as housing. Housing spending shrank about 28% year-on-year in the quarter. That’s unlikely to push the Bank of Canada off course, private sector economists argue. Governor Tiff Macklem signaled this month that he intends to keep raising interest rates in what economists call “constraint territory,” where borrowing costs act as a drag on economic activity. Financial markets are pricing in a 75 basis point rate hike for the Sept. 7 rate decision, while Bay Street forecasts suggest hikes of 50, 75 or 100 basis points are on the table for next week. (A base unit is one hundredth of a percentage unit.) “Inflation remains the BoE’s 1, 2, 3 and 4 priorities, so we don’t think today’s print will change the bank’s mindset towards the September rate announcement (especially given the strength in household spending),” Toronto-Dominion Bank rate strategists Andrew Kelvin, Robert Both and Chris Whelan wrote in a note to clients. “We continue to look for a 75bp rate hike next week, but the softer move in the third quarter suggests trouble ahead,” they wrote. Looking further ahead, they suggested the central bank may need to slow the pace of rate hikes in October and could opt for a 25 basis point rate hike at that point. Royce Mendes, chief macro strategist at Desjardins Capital Markets, said a 50 basis point rate hike next week is now more likely. “With the Bank of Canada already raising interest rates by 100 basis points in July, central bankers may be willing to slow the pace of hikes ahead of their peers, only pushing rates by 50 basis points next week. It is possible that monetary policymakers will move more than this, but cracks are clearly starting to form in the foundations of the economy,” he wrote in a note to clients. While growth was lower than expected, Canada continues to outperform peers, including the United States where economic activity contracted in the second quarter. Canadian consumer spending remained strong as people bought new clothes and shoes to get back to work at the office, and splurged on travel, restaurants and other services that reopened as pandemic restrictions were lifted. Business spending on inventories also boosted growth in the quarter, with a particularly notable jump in farm inventories. “Increased production of agricultural products in the second quarter, mainly wheat and canola, led to the largest increase in farm inventory investment since 1961, when quarterly data were first recorded,” Statscan said. This was offset by a decline in housing spending and consumer durables spending. Net trade also weighed on GDP in the quarter, with import growth outstripping exports. Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox morning or night. Sign up today.
title: “Canada S Economic Growth Misses Expectations But Unlikely To Prevent Another Big Boc Rate Hike Klmat” ShowToc: true date: “2022-11-04” author: “Andres Simoneaux”
Softening growth, however, is unlikely to prevent the Bank of Canada from another outsized rate hike when it makes its monetary policy decision next week, economists said. Canada’s economy grew at an annual rate of 3.3 percent in the second quarter, Statistics Canada said Wednesday, driven by strong consumer spending and business investment in inventories. That was tempered by a decline in residential spending and a rise in imports relative to exports, which pushed the quarterly GDP result below the Bank of Canada’s forecast for annual growth of 4 percent and the Bay Street consensus of 4 .4 percent growth. Preliminary estimates for July show that GDP fell by 0.1 percent that month. That suggests third-quarter growth is on track to undercut the central bank’s estimate of 2%, year-on-year, and could mark a turning point for the Canadian economy after a period of increased economic activity that accompanied the lifting of the pandemic. limitations. “While GDP growth was solid in the second quarter as a whole, it was weaker than expected and the slow end to the quarter, as well as the soft start to the third quarter, suggest that the economy is reacting more quickly to rising interest rates than what did the Bank of Canada expect. Canadian Imperial Bank of Commerce economist Andrew Grantham said in a note to clients. The central bank has raised interest rates at four consecutive meetings since March, including a full percentage point rate hike in July, the biggest single move since 1998. This campaign to raise borrowing costs is expressly aimed at slowing economic activity in an attempt to tame runaway inflation. While rate hikes may take six to eight quarters to have a full impact, Wednesday’s GDP data shows that higher borrowing costs are already squeezing rate-sensitive sectors such as housing. Housing spending shrank about 28% year-on-year in the quarter. That’s unlikely to push the Bank of Canada off course, private sector economists argue. Governor Tiff Macklem signaled this month that he intends to keep raising interest rates in what economists call “constraint territory,” where borrowing costs act as a drag on economic activity. Financial markets are pricing in a 75 basis point rate hike for the Sept. 7 rate decision, while Bay Street forecasts suggest hikes of 50, 75 or 100 basis points are on the table for next week. (A base unit is one hundredth of a percentage unit.) “Inflation remains the BoE’s 1, 2, 3 and 4 priorities, so we don’t think today’s print will change the bank’s mindset towards the September rate announcement (especially given the strength in household spending),” Toronto-Dominion Bank rate strategists Andrew Kelvin, Robert Both and Chris Whelan wrote in a note to clients. “We continue to look for a 75bp rate hike next week, but the softer move in the third quarter suggests trouble ahead,” they wrote. Looking further ahead, they suggested the central bank may need to slow the pace of rate hikes in October and could opt for a 25 basis point rate hike at that point. Royce Mendes, chief macro strategist at Desjardins Capital Markets, said a 50 basis point rate hike next week is now more likely. “With the Bank of Canada already raising interest rates by 100 basis points in July, central bankers may be willing to slow the pace of hikes ahead of their peers, only pushing rates by 50 basis points next week. It is possible that monetary policymakers will move more than this, but cracks are clearly starting to form in the foundations of the economy,” he wrote in a note to clients. While growth was lower than expected, Canada continues to outperform peers, including the United States where economic activity contracted in the second quarter. Canadian consumer spending remained strong as people bought new clothes and shoes to get back to work at the office, and splurged on travel, restaurants and other services that reopened as pandemic restrictions were lifted. Business spending on inventories also boosted growth in the quarter, with a particularly notable jump in farm inventories. “Increased production of agricultural products in the second quarter, mainly wheat and canola, led to the largest increase in farm inventory investment since 1961, when quarterly data were first recorded,” Statscan said. This was offset by a decline in housing spending and consumer durables spending. Net trade also weighed on GDP in the quarter, with import growth outstripping exports. Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox morning or night. Sign up today.
title: “Canada S Economic Growth Misses Expectations But Unlikely To Prevent Another Big Boc Rate Hike Klmat” ShowToc: true date: “2022-11-04” author: “Dennis Arnt”
Softening growth, however, is unlikely to prevent the Bank of Canada from another outsized rate hike when it makes its monetary policy decision next week, economists said. Canada’s economy grew at an annual rate of 3.3 percent in the second quarter, Statistics Canada said Wednesday, driven by strong consumer spending and business investment in inventories. That was tempered by a decline in residential spending and a rise in imports relative to exports, which pushed the quarterly GDP result below the Bank of Canada’s forecast for annual growth of 4 percent and the Bay Street consensus of 4 .4 percent growth. Preliminary estimates for July show that GDP fell by 0.1 percent that month. That suggests third-quarter growth is on track to undercut the central bank’s estimate of 2%, year-on-year, and could mark a turning point for the Canadian economy after a period of increased economic activity that accompanied the lifting of the pandemic. limitations. “While GDP growth was solid in the second quarter as a whole, it was weaker than expected and the slow end to the quarter, as well as the soft start to the third quarter, suggest that the economy is reacting more quickly to rising interest rates than what did the Bank of Canada expect. Canadian Imperial Bank of Commerce economist Andrew Grantham said in a note to clients. The central bank has raised interest rates at four consecutive meetings since March, including a full percentage point rate hike in July, the biggest single move since 1998. This campaign to raise borrowing costs is expressly aimed at slowing economic activity in an attempt to tame runaway inflation. While rate hikes may take six to eight quarters to have a full impact, Wednesday’s GDP data shows that higher borrowing costs are already squeezing rate-sensitive sectors such as housing. Housing spending shrank about 28% year-on-year in the quarter. That’s unlikely to push the Bank of Canada off course, private sector economists argue. Governor Tiff Macklem signaled this month that he intends to keep raising interest rates in what economists call “constraint territory,” where borrowing costs act as a drag on economic activity. Financial markets are pricing in a 75 basis point rate hike for the Sept. 7 rate decision, while Bay Street forecasts suggest hikes of 50, 75 or 100 basis points are on the table for next week. (A base unit is one hundredth of a percentage unit.) “Inflation remains the BoE’s 1, 2, 3 and 4 priorities, so we don’t think today’s print will change the bank’s mindset towards the September rate announcement (especially given the strength in household spending),” Toronto-Dominion Bank rate strategists Andrew Kelvin, Robert Both and Chris Whelan wrote in a note to clients. “We continue to look for a 75bp rate hike next week, but the softer move in the third quarter suggests trouble ahead,” they wrote. Looking further ahead, they suggested the central bank may need to slow the pace of rate hikes in October and could opt for a 25 basis point rate hike at that point. Royce Mendes, chief macro strategist at Desjardins Capital Markets, said a 50 basis point rate hike next week is now more likely. “With the Bank of Canada already raising interest rates by 100 basis points in July, central bankers may be willing to slow the pace of hikes ahead of their peers, only pushing rates by 50 basis points next week. It is possible that monetary policymakers will move more than this, but cracks are clearly starting to form in the foundations of the economy,” he wrote in a note to clients. While growth was lower than expected, Canada continues to outperform peers, including the United States where economic activity contracted in the second quarter. Canadian consumer spending remained strong as people bought new clothes and shoes to get back to work at the office, and splurged on travel, restaurants and other services that reopened as pandemic restrictions were lifted. Business spending on inventories also boosted growth in the quarter, with a particularly notable jump in farm inventories. “Increased production of agricultural products in the second quarter, mainly wheat and canola, led to the largest increase in farm inventory investment since 1961, when quarterly data were first recorded,” Statscan said. This was offset by a decline in housing spending and consumer durables spending. Net trade also weighed on GDP in the quarter, with import growth outstripping exports. Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox morning or night. Sign up today.
