OTTAWA – It’s reliable advice many Canadians were glad to see the rear of 2015.
There was a mini-recession, fuelled with a caving oil sector and pushed deeper by weak business investment, along with sagging exports as well as an equally worrying decline in imports – all leading to aggressive cuts within the country’s long-stagnant key lending rate.
That also kept downward pressure around the dollar, weakening the buying power Canadians, while failing to spur demand outside the country for our products.
“It would be a forgettable year overall,” admits Douglas Porter, chief economist at BMO Capital Markets.
But things might be searching for for that economy, if ever so slightly, with the year ending along with some a whoop, rather than a whimper.
On Tuesday, Statistics Canada delivered the full complement from the country’s 2015 economic data – for the final month, the final quarter and, finally, the whole year.
Gross domestic product rose by 1.2 percent this past year – matching the Bank of Canada’s forecasts – compared to a gain of 2.5 percent in 2014, while the economy edged up by an annualized 0.8 per cent between October and December, down from 2.4 percent within the third quarter.
“Maybe most impressive was the monthly gain in December,” Porter said, which was “quite solid and does provide a slightly better tone once we go to 2016.”
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For December alone, GDP grew 0.2 percent – a gentle gain, but it was likely a strong enough hand-off for this year’s first quarter, that the Bank of Canada has predicted should grow by one percent.
The Canadian dollar climbed by about 0.7 cents to more than US74.60 cents following the better-than-expected GDP report.
“Mauled by bears and left for dead just a couple weeks ago, the Canadian dollar has become back having a vengeance,” said NBF Economics and Strategy inside a research note.
“The loonie’s Revenant-like performance was helped with a softening greenback, but markets also began to wonder if or not the financial institution of Canada really needs to cut interest rates considering that upcoming fiscal stimulus will give you a boost to the economy.”
Despite a sluggish recovery in the second half of this past year, the Canadian economy still were able to claw back from the recession in the first two quarters of 2015 – when GDP contracted by 0.9 percent and 0.4 per cent consecutively because the collapse of global oil prices started to squeeze output – hitting resources-dependent Alberta and Newfoundland and Labrador the toughest.
Most economists are forecasting GDP development of 0.5 percent in the first quarter of 2016.
Mauled by bears and left for dead just a couple weeks ago, the Canadian dollar has become back with a vengeance.
“The worst is over,” Shaun Osborne, chief foreign-exchange strategist in Toronto at Bank of Nova Scotia, told Bloomberg News.
“If we get fiscal stimulus within the budget that’s meaningful and adds to growth momentum fairly significantly and rapidly, that cuts down on chance of Bank of Canada rate cuts this year, and in all likelihood means the following relocate rates in Canada probably will be higher, though not until 2017.”
The central bank taken care of immediately the energy crisis by twice cutting its key rate of interest by 25 basis points in 2015 – first in January and then again in July – using the trendsetting lending level to 0.5 percent. Governor Stephen Poloz and his policy council will announce its next rate decision March 9.
However, the bank is not likely to create a move on rates before the federal government’s 2016-17 finances are tabled on March 22, a monetary blueprint that will detail the Liberal’s proposed multi-billion-dollar economic plan that will include spending on infrastructure and regulations for middle-class Canadians.
More likely, Poloz will hold off coming to a adjustment to monetary policy until the April 16 rate decision, which is combined with the bank’s forward-looking quarterly Monetary Policy Report – allowing policymakers to gauge the potential impact of Ottawa’s spending plans.
Meanwhile, in Tuesday’s GDP report, Statistics Canada said business investment fell 3.3 percent in the fourth quarter of 2015, while household expenditures rose 0.2 per cent between October and December – down in the 0.5-per-cent rise in the third quarter.
Canadian exports were down 0.6 per cent within the final 3 months of the season, a dramatic reverse from a gain of 2.6 per cent within the third quarter. Imports were also lower in the fourth quarter, falling 2.3 percent after a 0.6-per-cent decline within the third quarter.
“I think we’ll apt to be close to one per cent again in the first quarter,” said BMO’s Porter.
“(But) let’s imagine oil prices make their way back over the next year and also the U.S. economy stays on the right track and also the Canadian dollar stays relatively low – and we get a helping hand from fiscal policy – I can see growth going back to over two percent the coming year.”
Financial Post
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