Forex Snapshot: Canadian Economy

Thinking of trading the Loonie? Take a quick look at Canada’s main economic components and see if you can find any forex trade opportunities!

Growth

Economic activity in Canada picked up by 0.6% in Q3 2015 after falling into a mild recession in Q2 2015. Monthly numbers also show improvements with the monthly GDP clocking in a 0.3% growth in November after stagnating in October and falling by 0.5% in September. Will the GDP continue its uptrend in Q4 2015? The BOC doesn’t think so. In fact, its members have predicted that GDP has stalled during the quarter. Yipes!

Employment

As I mentioned in my recent jobs data matchup, Canadian workers are starting to really feel the pinch of lower oil prices. Oil-producing provinces like Alberta, for example, are seeing dramatic declines in employment opportunities. The unemployment rate climbed in January even as participation rate remained at 65.9%. Meanwhile, part-time and full-time employment aren’t showing any trends, as their numbers mostly vary by province.

Inflation

Though the annual rate was boosted by the higher value of imported in December, the other inflation components aren’t as rosy. The core inflation rate registered below 2.0% for the first time in 17 months while monthly consumer prices also point to downtrends. Time to hoard maple syrup, then?

Businesses

Business and manufacturing numbers showed improvements in January after falling to contractionary levels in December. Some aren’t too excited though, as they point to start-of-year inventory-buying as reason for the upticks. Guess we’ll have to wait for the next reports to see if businesses sustain their optimism!

Consumers

Most of the data on consumer spending and activity tend to be delayed, but trends in consumer confidence and retail sales are showing steady uptrends all the way up to November. Will Canadian consumers extend their optimism in the next few months, or will lower employment prospects soon weigh on their buying activities?

Trade

One of the biggest benefits of having a weaker currency is a more competitive export market. This is probably why Canada’s trade deficit narrowed down in December as gains in exports outpaced improvements in imports.

Housing

We have yet to see January numbers for building permits and new housing prices, but the housing starts report is already reflecting the declining demand for new housing amidst lower employment prospects. Duhn duhn duhn.

TL;DR? Check out the economic snapshot I made for you!

Forex Snapshot: Canada's Economy

What’s next for Canada?

There’s no question that Canada’s economic prospects are affected by the dramatic declines in oil prices. Right now Black Crack’s prices are already making oil-related businesses jittery.

Low business sentiment and employment opportunities could eventually take their toll on consumer spending, housing demand, and inflation, and prompt the BOC to drop its interest rates to stimulate economic activity. Not all hope is lost though, as there are bright spots like Canada’s trading sector that are providing some support for the Loonie and optimism for the BOC.

For now it’s a waiting game for the BOC and forex traders to see if Canada’s economic components continue to suffer from the effects of lower oil prices. How about you? What’s your take on the economy? Have we seen the worst of the oil price decline impact or is Canada just getting started?

  • Ah Jaysus

    It’s going to get a lot worse for Canada. New Prime Minister Trudeau is way out of his depth and more interested in taking sefies than running the country. Canada has the third largest oil reserves in the world but they import most of their oil from terrorist regimes mainly because there is so much opposition to building pipelines from Alberta to the east and west or the country.

    • You forgot to mention that he also loves to balance babies. With that said, I do agree with you that Justin Tredeau is out of his depth, and that the Canadian economy is bound to get worse before it gets better.

      And yes, Canada’s oil import situation is rather ridiculous, but it’s even more ridiculous when you consider that Canada exports mainly to the U.S. while importing from the U.S. more and more.
      https://www.neb-one.gc.ca/nrg/ntgrtd/mrkt/snpsht/2014/11-01lmprt-eng.html