‘More muted growth picture’

Continued from FP1

The Canadian economy has been unexpectedly strong for the first half of this year — with second-quarter growth at 4.5 per cent — prompting the Bank of Canada to raise its key interest rate twice this summer.

But the latest round of trade data “adds to the evidence that the outsized outperformance of the economy over the last year is coming to an end,” said Nathan Janzen, a senior economist with the Royal Bank of Canada, in a note to clients on Thursday.

“It also, however, does not alter our expectation that growth will still remain at an ‘above-potential’ pace and — with the economy probably already quite close to capacity limits — that further gradual Bank of Canada interest-rate hikes will be warranted,” Janzen wrote.

CIBC Economics, however, expects the central bank’s “monitoring” of the economy to translate into a pause in interest-rate hikes.

“Exports have looked very soft, and are a reason why we are forecasting a more muted growth picture in the second half of the year,” it said in a note Thursday. “That should keep Governor Poloz using a more gentle hand on interest-rate hikes going forward.”

Exporters should get some assistance from the pullback in the loonie since September. Morneau said Thursday the weaker dollar would be “helpful” for exporters.

“There is positive opportunity for (exporters), and the broader economic trends would lead me to conclude that we have a positive future.”

On Thursday, Scotiabank released its latest economic forecasts, pointing to 3.1-percent GDP growth for 2017 and 2.0 per cent in 2018 — both unchanged from September but revised upward since July. Scotiabank also put out its first GDP growth forecast for 2019, pegged at 1.5 per cent.