Economic News and Forecasts
Periodically, as a member service, DHI Canada prepares a review of economic activity and forecasts from sources such as Statistics Canada, the Bank of Canada and the Canadian chartered banks. This information is captured on this page.
Summary of Bank of Canada's Monetary Policy Report, October 2020
November 2, 2020 - The Bank of Canada (BoC) issues a quarterly Monetary Policy Report (MPR), which we use as one of the inputs to our Economic Forecasts. In the April and July MPR, the Bank departed from its practice of including definitive economic forecasts, but returned to it in the October issue. We thought a digest of the MPR might be of interest to members and others, so we have prepared one. If you'd like to read the entire MPR, you can do so here.
StatsCan Releases August GDP; Q3 Flash Estimate
October 30, 2020 - Statistics Canada today released August GDP figures, showing the economy grew 1.2% month over month - a much slower pace than the 3.1% revised growth in July. The news was not so rosy for non-residential construction, which contracted a further 1.7%, with all components (industrial, commercial and institutional/governmental) being down. By contrast, residential construction grew 1.8% in the month. StatsCan also provided flash estimates for September (0.7% growth over August) and Q3 (approximately 10% growth compared to Q2, or an annualized rate of about 46%). Even with the relatively robust growth in Q3, we are still about 5% below pre-pandemic GDP levels. The release is available from StatsCan.
Bank of Canada Rate Still Holding at 0.25%
October 28, 2020 - The Bank of Canada today confirmed it is holding the overnight rate at the effective lower bound of 0.25%. In its release, the Bank indicated it would continue to maintain this rate until its target inflation rate of 2.0% is "sustainably achieved"; they estimate this will not happen "until into 2023". At the same time, the Bank will be gradually reducing purchases under its quantitative easing (QE) program to $4 billion per week (down from $5 billion when the program was initiated); between maintaining the rate at 0.25% and reducing QE purchases, the Bank estimates it will be providing at least as much monetary stimulus as before.
The Bank is projecting a 5.5% decline in Canada's GDP for 2020, followed by two years in which growth will average 4%. They note that "Growth will likely be choppy as domestic demand is influenced by the evolution of the virus and its impact on consumer and business confidence."
July GDP Figures Released
September 30, 2020 - Statistics Canada released the July GDP figures today. With month-over-month growth of 3%, GDP growth is slowing down. This is the thrid consecutive monthly increase in GDP, but it still leaves the economy 6% below February's pre-COVID levels. Construction activity was up by 0.6%, due to increased activity in residential and repair construction. Non-residential building fell by 3.0%. The flash estimate for August indicates a 1.0% increase in total GDP over July. You can read the release from StatsCan here.
Canadian Bank Rate Remains Unchanged at 0.25%
September 10, 2020 - To no one's suprise, the Bank of Canada announced yesterday it was maintaining the bank rate at the effective lower bound of 0.25%. In the press release, the Bank noted that recovery in the third quarter will probably be stronger than predicted in their July Monetary Policy Report, but this will be followed by a "protracted and uneven recuperation phase, which will be heavily reliant on policy support." The reference to policy support is confirmation that interest rates will likely remain at their current levels for some time to come. This was further clarified in the release: "The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved." The release sounded a note of caution, noting that the path of the recovery will be dependent on what happens with COVID-19, and stated the Bank will maintain its current quantitative easing program, under which they are repurchasing at least $5 billion worth of Government of Canada bonds each week. You can read the full announcement here.
Construction Investment and Building Permit Activity
September 3, 2020 - Last week, Statistics Canada released information on investment in construction (for June 2020) and building permit activity (for July 2020). While non-residential construction in June exeeds pre-COVID levels and is actually running ahead of June 2019, there is no corresponding recovery in non-residential building permits: as of the end of July, it's still down more than 13% compared to February 2020 and over 21% below July 2019. You can read our analysis here.
Q2 2020 GDP Released by Stats Can - and as Expected, It's Not Good News
August 28, 2020 - Statstics Canada reported on Canadian Q2 GDP today. The economy shrank by 11.5% compared to Q1 - an annualized decline of 38.7%. This is marginally better than predicted in July (see below), but still "the steepest [decline] since quarterly data were first recorded in 1961". All sectors of the economy were down. Non-residential business building construction fell in Q2 by an annualized 11.8%, while government investment in non-residential buildings was down 4.1%. As a comparison, the total US GDP shrank at an annual rate of 31.7% in Q2. With the reopening of the economy, we're expected to be back in growth mode in Q3. Full information is available on the Stats Can website.
May 2020 GDP Grows; Stats Can Releases Flash Estimates for June and Q2
July 31, 2020 - Statistics Canada today released their May GDP figures, showing growth of 4.5% over April, with 17 of 20 industrial sectors posting increases. Non-residential construction was up 56.7%, as all three subsectors (industrial, commercial and institutional) recorded double-digit increases. The flash estimate for June calls for a further 5% growth as provincial economies continue reopening. However, Q2 GDP is expected to show a 12% decline compared to Q1 (approximately a 40% annualized decline). You can read the article here.
Bank of Canada Holds Interest Rates, Forecasts GDP Decline in 2020 of Almost 8%
July 15, 2020 - The Bank of Canada today held interest rates steady at 0.25%, which it calls the effective lower bound. In its release announcing the rate, the Bank said "The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved," so we can expect to see this rate for the forseeable future, probably well into 2021. At the same time, the Bank forecast a contraction in GDP for 2020 of 7.8% before returning to growth (5.1% in 2021 and 3.7% in 2022). The Bank will also continue its quantitative easing program. The full press release is available on the Bank's website.
Government of Canada Releases Economic and Fiscal Snapshot
July 15, 2020 - The Government of Canada (Department of Finance) last week released an economic and fiscal snapshot for Canada's economy in the wake of COVID-19. They are forecasting a contraction in GDP for 2020 of 6.8% followed by growth of 5.5% in 2021. This is generally within the ranges identified by private sector forecasters. Unemployment in 2020 is expected to be about 9.8%, declining to 7.8% in 2021. They are also calling for a federal deficit in 2020-21 of $343.2 billion - about 10 times that projected deficit of $34.4 billion for 2019-20. Some $227.9 billion of the deficit will result from the government's COVID-19 Economic Response Plan. This will bring the accumulated federal debt to just over $1 trillion, or 49.1% of GDP. Full details are available here.
April 2020 GDP and Flash Estimate for May Released
June 30, 2020 - Statistics Canada today released April 2020 GDP figures. Their earlier "flash" estimate called for a decline of 11% compared to March, but the results were actually marginally lower than that, at -11.6%. The carnage was widespread, with all 20 reporting sectors seeing declines. Non-residential construction fell by 36.0% as commercial, public and industrial construction were all down by double-digits. The bright spot in today's announcement was the "flash" estimate for May, which indicates an increase of approximately 3.0% as a result of reopening initiatives across the country. Read the release here.
June 2020 Economic Forecast
June 29, 2020 - Fearlessly looking into our crystal ball, DHI Canada has prepared an economic review and updated forecast for the balance of 2020 and into 2021. As grisly as it is, you can read it here.
StatsCan Releases March 2020 GDP and Flash Estimate of April 2020 GDP
June 1, 2020 - Statistics Canada released a "flash" estimate for April 2020's Gross Domestic Product, forecasting an 11% decline for the month compared to March. They note that this is a preliminary estimate and that it will be revised as more information becomes available. However, taken together, the March and April declines will likely be the largest consecutive monthly decreases on record. March GDP fell by 7.2%, with almost all sectors being down as a result of measures taken to restrict the spread of COVID-19. Construction (of all types) was down by 4.4%, the largest decrease since the 3.3% contraction experienced by the sector in January 2009. Please see here for more information.
Q1 2020 GDP Down, But Not As Far As Expected
May 28, 2020 - Statistics Canada today released figures for the first quarter's GDP. They show a decline of 2.1% compared to Q4 2019, or an annualized decrease of 8.2%, due to COVID-19. Pundits had expected a 10% annualized decline, so the damage is not as severe as originally anticipated. This marks the sharpest decrease since economic output fell 2.3% (quarter over quarter) in the first quarter of 2008 as a result of the financial crisis. Non-residential construction actually showed an increase over Q4 of 0.5%, although StatsCan notes that "Technical and operational delays were encountered in the production of source data on buildging construction investment" and warned that larger than usual revisions may be made as actual data becomes available. Full details are available from StatsCan's website.
2020 Economic Forecast
January 2020 - Our 2020 economic forecast, written in November 2019 and published in Door Security + Safety magazine's January issue calls for moderate growth in 2020's Canadian GDP (1.4%) amid a general softening of the economy. At the time, we identified uncertainty around pending resolution of international trade disputes, but rejected the idea of a recession. You can read the details here.
Q3 2019 GDP Growth Rate Slows, As Expected
December 4, 2019 - Statistics Canada released Q3 GDP figures on Friday. Overall, they show a moderated growth rate of 1.3% (quarter over quarter, seasonally adjusted at annual rates [SAAR]). Of interest to DHI-C members, non-residential building activity showed annualized growth of 11.1% (a quarterly increase over Q2 of 2.7%) - an unexpectedly strong showing. Exports were down by 1.5% SAAR, driven by non-energy exports, and imports were relatively flat. GDP performance in the quarter is in line with recent expectations, although it's moderately lower than the consensus estimates we reported in our September economic forecast (see below). Detailed information is available here.
Bank of Canada Maintains Overnight Rate
December 4, 2019 - As was almost universally expected, the Bank of Canada maintained its overnight rate at 1.75% today. In its press release, the Bank said there is evidence the global economy is stabilizing and it expects global growth to edge higher over the next couple of years. Economic growth in Q3 2019, while lower than that in Q2, came in at the expected 1.3%, the household sector growth is holding up and inflation remains at around 2%. Not surprisingly, the bank noted international trade tensions as an ongoing wild card, and cited it (and the Canadian economy's ability to absorb tade shocks) as the key factor it will be monitoring in deciding whether to decrease the rate in 2020. The announcement was therefore relatively neutral in terms of whether we can expect any decreases in the coming year. You can read the press release on the Bank's website.
August 2019 Investment in Building Construction Data Released
October 28, 2019 – On October 21, Statistics Canada released the August Investment in Building Construction figures. Nationally, investment grew by 1.4% compared to July (seasonally adjusted at annual rates, and expressed in current dollars). Most of that growth was in residential construction (up 1.8%). Non-residential construction investment increased by 0.5% in the same period; within this sector, commercial construction and institutional/governmental construction were both up (0.8% and 0.2% respectively), while industrial construction fell by 0.4%. Detailed information is available here.
August 2019 Construction Permit Data Released
October 9, 2019 – Statistics Canada today released data on building permits for August 2019. Overall, building permit activity declined by 1.7%, from $10.0 billion to $9.8 billion. Residential activity increased by 7.2% ($6.4 billion in August compared with $6.0 billion in July) but non-residential permits declined by 14.8% ($3.4 billion in August versus $4.0 billion in July). In the non-residential sector, only the industrial subsector posted an increase (11.3%, going from $758 million to $844 billion); the commercial and institutional/governmental subsectors were both down – 13.6% and 37.3% respectively. We've prepared a summary of the data for selected types of construction. You can find complete information on the Statistics Canada site.
July 2019 GDP Data Released
October 1, 2019 - Statistics Canada today released GDP data for July (here). Goods-producing industries' output fell by 0.7% while service-producing industries grew by 0.3%; the net result was no GDP growth for the month. Non-residential construction was up by 0.7% - the seventh time in eight months activity in this sector increased. All sub-sectors - commercial, industrial and public sector - showed increases.
DHI Canada 2019 Q2 Economic Review and Forecast
September 18, 2019 - DHI Canada is pleased to present its 2019 Q2 economic review and forecast. We discuss late breaking information, including the recent drone strikes on Saudi Aramco - read it here!
Canadian Interest Rates Unchanged
September 5, 2019 - The Bank of Canada left its target interest rate unchanged at 1.75% yesterday. This represents a balancing act between an unexpectedly strong GDP performance in Q2 on the one hand, and several moderating factors on the other - an expectation that GDP growth will slow in the balance of the year, slower growth in consumer expenditure in Q2, and international trade tensions (chiefly between the US and China). The Bank's announcement (here) indicated it remains watchful, and did not contain any particularly strong hints about future interest rate policy, although some analysts think that a decrease in the rate next month is a definite possibliity. The Bank did note the inverted bond yield curves that have developed recently in the Canadian and other economies - usually a signal of an upcoming recession. This risk might be sufficient to cause a rate drop at some point during the rest of the year.
Data on Canadian GDP Q2 2019 Released
September 5, 2019 - Statistics Canada released data for the second quarter gross domestic product August 30. Seasonally adjusted at annual rates and in 2012 dollars, the economy showed a surprising growth rate of 3.7%, helped by a 13.4% annualized increase in exports. For comparison, the US economy showed only a 2% growth in the same period. Business investment (non-residential structures, machinery and equipment) was down by an annualized 16.2% in the quarter, driven by a decline in machinery and equipment investment and engineering construction; investment in non-residential structures continued to grow, but the pace slowed compared to the first quarter. The growth rate for consumer spending slowed to an annualized 0.5% for the quarter, compared to 0.7% for the first quarter, in spite of a 1.7% annualized growth in employment income. A full analysis is available on the Stats Can website.
May GDP Data
July 31, 2019 - May gross domestic product data was released by Statistics Canada today. It shows a total growth of 0.2% over April, led by manufacturing, which posted a gain of 1.2% for the month. Construction activity also grew by 0.9% month-over-month, although this was driven primarily by residential (up 2.2% over April); non-residential construction fell slightly by 0.1% StatsCan's analysis is here.
April GDP Data
June 28, 2019 - Statistics Canada today released data for monthly gross domestic product by industry. Overall, GDP grew by 0.3% in comparison with March. The construction sector also showed gains; the increase for all construction was 0.2% in April, while non-residential construction increased 0.7% month-over-month. This is the fifth consecutive month of increases for non-residential construction, and all subsectors (industrial, commercial and institutional) were up. You can read the analysis here.
April 2019 Investment in Building Construction
June 24, 2019 - Statistics Canada has released building construction investment statistics for April 2019 (https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3410017501). Overall building investment grew at a seasonally adjusted 2.5% to $14.87 billion current dollars over the March 2019 levels. Most of the growth came from residential construction, which was up 3.6% to $10.14 billion. Non-residential construction showed a more anemic growth rate of 0.4% to $4.73 billion. Investment in industrial construction also grew 0.4% to $892 million; commercial construction increased 0.3% to $2.71 billion and institutional/governmental increased 0.5% to $1.13 billion.
In constant (2012) dollars, netting out the effects of inflation, performance was somewhat better. Overall construction investment grew 2.8% to $12.49 billion, residential investment was up 3.9% to $8.41 billion, and non-residential grew by 0.7% to $4.08 billion. Within the non-residential construction sector, industrial investment increased by 0.7% to $771 million, commercial construction was up 0.6% to $2.32 billion and institutional/governmental investment grew to $989 million (an increase of 0.8%). In context, institutional governmental construction investment has actually fallen by 0.8% compared to its December 2018 level of $997 million; this is likely an effect of the planned easing of government stimulus programs that were begun in 2008/2009 along with a generally more conservative approach to budgeting, which is focusing on deficit reduction.
DHI Canada 2019 Economic Review and Forecast
May 1, 2019 - DHI Canada is pleased to present the first quarter 2019 economic review and updated forecast. You can read it here.
2018 GDP Estimates Released
April 3, 2019 - Global News is reporting that Canada's GDP is estimated to have grown by 1.8% in 2018, below forecasts of 2.1% but in line with our November 2017 forecast (below) of 1.8% to 1.9%. Very slow growth in the fourth quarter pulled GDP for the year down. You can read the Global News article here.
DHI Economic Briefing - Construction Activity Report 2018
February 25, 2019 - Statistics Canada has released reports on construction activity for December 2018 and GDP for November 2018. Growth in the construction sector has been driven by increases in non-residential construction, but the picture net of inflation isn't quite so rosy. We've put the information together for you, and you can read it here.
DHI Canada Economic Review and Forecast
December 13, 2018 - DHI Canada is pleased to present its economic review and forecast for 2018-19. You can read it here.
2017 GDP Figures Released
April 23, 2018 - Statistics Canada today released results for 2017 GDP. The economy grew in 2017 by 3.0% (the high end of our forecast from November 1), driven by household spending, business investment in non-residential structures and machinery and equipment, and exports of goods and services. Of particular interest to members, investment in non-residential structures contributed about 0.02% to total GDP growth for the year; for comparison, machinery and equipment contributed about 10 times that. Total business investment, excluding residential structures, grew by 2.6% for the year after a decline of 9.4% in 2016. The forecast for 2018 is for slow growth in this area of the economy - about 0.8%, primarily as a result of public sector spending. Oil and gas spending intentions, indicating a decline of almost 12% for 2018, will be the major downward force. However, if recent increases in oil prices continue, this may change although the effect will not likely be felt until the second half of the year. You can read the Statistics Canada report here.
Bank of Canada Holds the Line on Interest Rates
March 7, 2018 - The Bank of Canada today kept its target interest rate at 1.25% today. Analysts say this is due to a combination of international trade uncertainty and slowing growth in jobs and the economy. The international trade front is clouded by the Trump administration's recent announcement of higher tariffs on US imports of steel (25%) - about 90% of our total steel exports are destined for the US - and aluminium (10%) plus the generally gloomy feeling after the most recent round of NAFTA negotiations. Although the economy grew at a projected rate of 3.0% in 2017, Q4 growth was slower than the Bank expected. Recent softening in the dollar exchange rate (today, it's trading at below US$0.77, down from the US$0.78-$0.80 we've seen lately) may also have contributed, as has the fact that inflation is running close to the bank's target of 2%. The Bank maintained its position that interest rates will continue to rise long-term, but was more cautious about short-term increases than it was in February. You can read the Bank's announcement here.
Canadian Operating Profits Down in Q4 2017
February 23, 2018 - Statistics Canada reports that operating profits from Canadian corporations decreased by 1.9% in Q4 2017 compared to the prior quarter, and were 0.7% lower than Q4 2016. Total profits earned by Canadian corporations in the last quarter of 2017 were $98.6 billion. Compared to Q3, net profits fell by 3.3% to $76.5 billion. Financial services led the decline, with most areas of non-financial industries actually seeing profit increases. You can the notice here.
Canadian Building Permit Activity - December 2017
February 9, 2018 - Statistics Canada released December 2017 building permit data this week. December 2017 saw a slight decrease in non-residential construction permits issued compared to November, but overall, December 2017 showed growth in permit activity over the same month in 2016. Preliminary figures in permit activity for the full years 2017 and 2016 also showed general increases. Read our report and analysis here.
Bank of Canada Raises Interest Rates
January 17, 2018 - As predicted, the Bank of Canada raised its target interest rate by a quarter point to 1.25% today. The Bank cited a positive business outlook, recent strong jobs reports, inflation at or near the 2% target, and forecast economic growth of 2.2% in 2018 as reasons for the rate hike. The announcement reports that uncertainty over the future of NAFTA has been priced into the economic growth forecast, so the Bank has not felt that any interest rate action regarding the potential unwinding of the trade pact is necessary at this time. Speculation last week that the Bank might hold the rate at 1% in the wake of wide-spread fears of an imminent unilateral US pullout from the NAFTA talks appear to have been unfounded. The Bank also said that interest rates should continue to rise over the longer term, but that it would monitor economic developments to determine what rate action might be necessary. The next scheduled rate announcement is March 7, 2018. You can read the text of the Bank's announcement here.
Interest Rates to Rise
January 9, 2018 - The Bank of Canada is widely expected to increase its interest rate at its meeting January 17. The expectation is based on strong business sentiment as captured in the Bank's Business Outlook research and the most recent employment figures, which showed unemployment at its lowest level in about 40 years and the creation of an estimated 80,000 jobs in December 2017. The US Federal Reserve Board is also expected to increase American interest rates in March, so the Canadian hike will anticipate that event. The Canadian dollar continues to hover around the 80 cent US mark as a result.
October 2017 GDP - Construction
December 22, 2017 - Statistics Canada reported GDP statistics for October 2017 today. Overall, GDP was unchanged from September 2017, although total construction activity declined by 0.1%, led by non-residential construction (down 0.3%). This is the first decline in total construction and non-residential construction in four months. Within the non-residential area, a decline in commercial activity more than offset growth in industrial and institutional construction. Economic results are in line with Bank of Canada predictions of a softening economy in the 4th quarter of 2017. See the data here.
Exports of Doors/Windows/Frames and Automatic Door Closures
December 11, 2017 - Statistics Canada reports exports of doors/windows/frames for Q3 2017 ($213 million) were slightly lower than in Q2 but well ahead of levels seen in Q1 2017 and Q4 2016 and that the vast majority of sales were to the US. Exports of automatic door closures in Q3 2017 ($406 thousand) were substantially above levels in the previous three quarters. 2017 year-to-date exports of doors/windows/frames ($704 million) indicate that the final 2017 export volume will, we believe, likely equal 2016's $748 million. Year-to-date levels are well above the final year totals for the period 2014-2015. Automatic Door closure exports for 2017 to date ($1.1 million) are about one third of 2016 levels but slightly above levels for 2014-2015. See the data here.
DHI-C Quick Economic Briefing - August GDP, NAFTA
November 1, 2017 - DHI Canada is pleased to present its Quick Briefing on Canadian Gross Domestic Product (GDP), our own economic forecast and the possible future of the North American Free Trade Agreement (NAFTA). The briefing is available here.
Bank of Canada News
October 25, 2017 - The Bank of Canada today decided to keep its target overnight lending rate at 1%. Some forecasters were predicting a rate increase this month, but the Bank decided that, given strong Canadian economic activity, inflation below the target rate of 2% and the somewhat uncertain international economic situation (especially as regards NAFTA renegotiations), there was insufficient justification to raise the rate. An increase in December is still a possibility. You can read the announcement here.
In its October Monetary Policy Report (MPR), the Bank is projecting Canadian GDP growth of 3.1% in 2017, 2.1% in 2018 and 1.5% in 2019. Growth, which has been strong in the first half of 2017, is expected to moderate somewhat in the last two quarters. Business investment, which includes investment in non-residential construction, is expected to remain robust over the three-year projection horizon. You can access the full MPR here.
Q3 2017 Non-residential Building Statistics
October 16, 2017 - Statistics Canada has released non-residential building statistics for Q3 2017. Nationally, the non-residential sector (industrial, commercial and institutional) saw growth of 3.6% compared to Q2. The big "winners" were educational buildings in the institutional sub-sector (up 18% compared with 4.6% growth for the sub-sector overall) and office buildings in the commercial sub-sector (which led the sub-sector to a 2.6% growth rate). The industrial sub-sector saw 6.0% growth, led by investment in the construction of farm buildings and, to a lesser extent, manufacturing plants. For the Statistics Canada bulletin and links to various tables, please click here.
Q2 2017 Non-residential Building Statistics
August 9, 2017 - Statistics Canada has released its report on Q2 2017 non-residential building construction. While overall construction activity was up by 0.3% in current dollars, it actually fell by 0.7% in terms of constant (2007) dollars - constant dollars net out the effects of inflation. Read the full article here.
Summer 2017 Review
August 1, 2017 - A lot has happened since our first review – recovery from the Fort McMurray fires, the end of the oil price shock, Brexit and election of a new US government, to name a few. How will these and other events impact our economic future? Click here to read the summer 2017 DHI-C economic forecast review.
Summer 2016 Review
August 4, 2016 - As a service to members, DHI Canada is pleased to present its first review of economic forecast data. How do you expect to fare in the next couple of years? Read the full article here.