Briefing highlights
- What to expect from GDP report
- Global markets mixed so far
- New York futures little changed
- Canadian dollar at about 80.5 cents
- Investors eye Catalonia referendum
- VW takes $3-billion hit on scandal
- Carney sees near-term rate hike
- Britain’s GDP growth revised down
Canada's economy is believed to be slowing from the eight-cylinder pace of the first half of the year.
That's in some ways welcome because we're running out of synonyms and clichés for turbo-charged, hotted-up and souped-up.
Welcome, too, because that would reflect an easing from the stratospheric heights of certain housing markets.
The economy expanded at an annual pace of 4.5 per cent in the second quarter, following on the heels of a strong first three months..
At 8:30 a.m. ET, we'll see how the current quarter kicked off when Statistics Canada releases its July look at gross domestic product.
Economists expect that report to show modest growth of just 0.1 per cent as the economy downshifts in the second half of the year and into 2018.
Which isn't surprising because it's hard to keep up a pace of 4.5 per cent.
Also not surprising because the Toronto and Vancouver housing markets were so hot that federal and provincial governments had to get out the policy hoses. And now, interest rates are rising, which will crimp our spending.
"July will be a taste of things to come, with growth in the third quarter likely to cool to a 2-per-cent or so pace – less than half of what we saw in Q2," said CIBC World Markets economist Nick Exarhos.
"With less slack in the economy, and tightening from the BoC capping how hot growth can run."
Remember, though, we're talking about slower economic growth, not an outright setback. Remember, too, that Canada is still forecast to lead the G7 countries in economic growth this year, according to the Organization for Economic Co-operation and Development.
There will be a turn in fortunes, though, as the energy-dependent provinces continue to rebound from the oil price collapse and the new powerhouses of British Columbia, Ontario and Quebec take a back seat.
"We continue to look for growth of just over 2 per cent next year, which is much better than the meagre 1-per-cent pace seen for two years in the immediate wake of the oil shock," said Bank of Montreal chief economist Douglas Porter.
"But that improvement stems mostly from better conditions in the oil patch, and not from the underlying economy in the rest of Canada."
Mr. Porter has seven reasons for his belief that "Canada's astonishing 2017 growth performance is already past its peak, and that activity will fade in the coming year."
In a recent report, he cited five factors behind the performance of Quebec, B.C. and Ontario, and two more for the latter, that are ending.
1: Low interest rates.
2: A much weaker Canadian dollar: "Arguably, the big move in the loonie this year has removed any competitive advantage for exporters, taking it close to fair value."
3: Low energy costs: "While far from strong, oil at over $50 [U.S.] is back close to its long-run norm. Consumers, meantime, have been dinged by various carbon taxes."
4: The federal government had a "meaty" spending spree that included the Canada Child Benefit to help juice the economy, but "that boost won't be repeated."
5: We're eating up our economic slack: "Up until recently, relatively high unemployment rates meant employers could readily hire to expand. But jobless rates in much of the country are now approaching multi-year lows (and record lows in Quebec)."
6: Specific to Ontario here, U.S. auto sales are "rolling over," which affects Canadian assembly: "What had been a consistent growth booster now looks to become a drag."
7: Southern Ontario's "steaming hot" housing market is now just simmering as the oven cools, and "the swift reversal … is more likely to dim growth in the year ahead."
Read more
- Ian McGugan: Boom in consumer spending fuels Canadian economy
- Canada’s economy the G7 powerhouse, but housing a threat: OECD
- When the dog bites. When the bee stings. When you owe a lot and rates spike
- How Canada could end up with the G10’s highest interest rates
- Barrie McKenna, Rachelle Younglai: Bank of Canada, major lenders hike rates as economy roars
- David Parkinson: The beginning of runaway rate hikes? Don’t bet on it
Markets mixed
Global stocks are mixed so far, and the Canadian dollar is at about 80.5 cents (U.S.) as the third quarter ends.
Tokyo's Nikkei dipped marginally, while Hong Kong's Hang Seng gained 0.5 per cent, and the Shanghai composite rose 0.3 per cent.
In Europe, London's FTSE 100 and Germany's DAX were up by between 0.2 and 0.5 per cent by about 4:30 a.m. ET, with the Paris CAC 40 down, though by less than 0.1 per cent.
New York futures were little changed, and the loonie, having hit the 80.5-cent mark earlier, was just shy of that.
Europe is looking toward Catalonia's independence referendum on Sunday, which Spain says is illegal and which could move the euro.
"If the outcome is more than 50 per cent (regardless of turnout), the regional government has said it will declare independence within 48 hours," said Adam Cole, Royal Bank of Canada's chief currency strategist in London.
"In such an outcome, or if there is widespread unrest on Sunday, expect [the euro] to open lower on Monday morning."
Read more
More news
- VW takes new $3-billion hit over diesel emissions scandal
- U.K. on track for rate hike in ‘relatively near term’: Carney
- U.K. annual GDP growth revised down for second quarter