(Newswire.net — April 20, 2016) — Canada’s economic data has seen highs and lows in the run-up to the Bank of Canada’s policy announcement and Monetary Policy Report. The expected 10.0k gain in March jobs was dwarfed by a robust 40.5 gain likely putting little shock value, to the BOC announcement. Ongoing improvement as the economy continues to rebalance between resource and non-resource sector growth should be sufficient for the Bank to leave policy unchanged next week and maintain a cautiously constructive outlook that leaves no change in policy as the base case well into 2017. The real driver of the strength of the Canadian dollar has been the price of oil, but a surprise by the BOC could be a factor in future movements of the Loonie.
The employment figures will be the final report before the Bank of Canada’s announcement and MPR on Wednesday, April 13. A jobs report that is roughly in-line with projections for a modest total jobs gain and no change in the elevated 7.3% unemployment rate would fall in-line with the Bank’s business outlook survey. That survey showed improved but still subdued sentiment overall, with sharply diverging regional perspectives that are tied to commodity trading sector and foreign demand exposure. Investment and employment intentions improved but remain modest. Hence, the take away is one of modest improvement that shows Canada’s economy is moving in roughly the direction anticipated by the Bank at the time of the January MPR.
Of course, the outsized GDP report and sizable worsening in the trade balance to needs to be grappled with. The 0.6% surge in January GDP left an economy running faster than the most optimistic scenario for the month. Moreover, there were not any distortions or special factors behind the acceleration, just good old fashioned broad-based growth. The strong start to the quarter leaves Q1 on track for a 2.5% GDP clip that will easily outpace the BoC’s 1.0% estimate from the monetary policy report. Additionally, the growth outlook for the year was lifted, with a 1.7% estimate now seen. Hence, the Monetary Policy Report should feature an upward revision to Q1 GDP and to the 2016 projection, with 2017 likely to be lifted as well. Fiscal stimulus will provide a further boost to the outlook, which the Bank will take into account.
Overall, there is a mixed bag of economic reports and developments going into the April announcement and MPR. These kinds of swings in monthly economic reports are not surprising for an economy in transition. The Outlook Survey’s presumably steadier hand is likely closest to the mark, with its depiction of an improved but still cautious backdrop for business sentiment that tracks the gradual recovery scenario for the domestic economy anticipated by the Bank of Canada. While the Loonie may continue to improve alongside oil prices, a dovish bent by the BOC could change the trajectory very quickly.