ANALYSIS HERE COME THE ECONOMIC HEADWINDS, BUT EMPLOYERS ARE STILL FILLING VACANCIES
Gaps may be appearing in the economic landscape, but that hasn’t stopped employers from hiring.
Output in gross domestic product is slowing along with international trade, as predicted, with a growing gulf between an economic surge in the first half of this year and the outlook for much slower growth in coming months.
GDP has gone from 4.5-percent annualized growth in the second quarter of this year to a flat reading in July and a decline of 0.1 per cent in August, with manufacturing leading the declines, contracting by 0.1 per cent after easing back 0.2 per cent in July.
That has set the tone for, at best, a two-per-cent increase in output in the third quarter, according to private-sector forecasters.
The Bank of Canada has been less generous, with a 1.8-per-cent estimate, followed by a slight rebound to above two per cent in the final quarter.
It’s unlikely 2018 and 2019 will fare much better overall, with the central bank forecasting growth of 2.1 per cent and 1.5 per cent, respectively.
But jobs are still being created. Employment grew by 35,000 net positions in October, with many Canadians finding full-time jobs in the private sector, Statistics Canada said Friday.
“Growth indicators for Canada have been decelerating, but you wouldn’t know it looking at the labour market, where employers are still beefing up their workforce,” said Avery Shenfeld, chief economist at CIBC World Markets.
Meanwhile, Canada’s trade deficit with the rest of the world remained around $3.2 billion in September, the federal data agency reported Friday, with exports down 0.3 per cent and imports decreasing at a similar pace.
“With much of the Q3 weakness seemingly down to temporary factors, and growth still tracking above potential, there is no reason for Canadians to worry,” said Brian DePratto, senior economist at TD Economics.
“Indeed, although there remain some wild cards, such as the impact of a strike in the auto sector, it is likely that output will come back to life in coming months, particularly given still encouraging signs from labour and housing markets,” DePratto said in a note to investors.
The top two policy-makers at the Bank of Canada will be making appearances — and possibly some news — this week and next.
Governor Stephen Poloz is scheduled to speak to financial and foreign relations specialists in Montreal on Tuesday, followed by a news conference, while senior deputy governor Carolyn Wilkins is scheduled to address U.S. industry officials at New York University on Nov. 15.
Both Poloz and Wilkins have acknowledged the threats to continued economic growth, a concern they highlighted in the central bank’s Monetary Policy Report — released Oct. 25 and accompanied by a decision to keep the central bank’s trendsetting lending rate at one per cent — and again on Oct. 31, when they went before law makers in Ottawa.
“We are at a crucial spot in the economic cycle, and significant uncertainties are clouding the way forward,” Poloz told the House of Commons finance committee. “We will also look to see how the household sector is responding to the new rules about mortgage underwriting.”
Poloz said the central bank has not yet incorporated the risk of more protectionist trade policies into its projection, given the range of potential outcomes and the uncertainty about timing.
“However, we acknowledge that uncertainty about future U.S. trade policy is having some impact on business confidence and investment spending, and this impact is reflected in our outlook,” Poloz said. “We will also look to see how the household sector is responding to the new rules about mortgage underwriting.”
So far, it’s too early to tell how far the economy will sway in coming weeks and months.
Meanwhile, U.S. president Donald Trump will remain an important figure to watch as Jerome Powell, his hand-picked successor to Federal Reserve Chair Janet Yellen, prepares to take the reins.
“He has proven to be a consensus builder,” Trump said. “I am confident that has the wisdom and leadership to guide our economy.”
Although there remain some wild cards ... it is likely that output will come back to life in coming months.