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As I noted in my “Global Market Meltdown: Forex Winners and Losers” article, the Loonie was one of the currencies that got hammered due to concerns over demand for commodities.

Commodity prices notwithstanding, how is Canada’s economy doing lately? Should forex traders really be concerned? Time to find out!


Canada’s real GDP fell for the fifth consecutive month, declining by 0.2% in May after posting a 0.1% downtick back in April. Scanning through the report, it looks like a 1.7% contraction in manufacturing output was the main culprit for the decline in GDP growth.

Another major culprit was the 0.7% contraction in mining, quarrying, and oil and gas extraction. This marks the seventh straight month of contractions for this sector.

In addition, a solid 1.0% decline in wholesale trade also put a hurt on Canada’s GDP growth. The retail trade (+0.3%) and the construction (+1.0%) industries tried to stem the bleed-out, but it was obviously to no avail.

Forex - Canadian GDP Contributions
Source: Statistics Canada


Canada’s jobs data for July was unremarkable on the surface since the Canadian economy only had a net gain of 6.6K jobs for the month. Still,  the net increase in jobs managed to wipe out the previous month’s loss of 6.4K jobs, so it’s all good.

Unfortunately, full-time employment decreased by 17.3K, but it was offset by a 23.9K increase in part-time jobs. A full-time job is better, though, since it generally offers better pay and job security.

As for the jobless rate, it continued to hold steady at 6.8% for the sixth consecutive month now, but this semblance of stability was soured a bit by the labor force participation rate ticking lower to 65.7% from 65.8%.

Forex - Canadian Jobless Rate

According to the details of the report, the services-producing sector gained 18.8K new workers while the good-producing sector lost 12.2K workers.

Among the goods producing sector, the construction industry got hit the hardest, losing 8.3K or 0.6% of its workers. The manufacturing sector got hit bad too, losing 4.6K or 0.3% of its workers.

As for the natural resources industry, which includes forestry, fishing, mining, quarrying, and oil and gas extraction, it saw its workforce reduced by 0.6% or 2.0K workers.

Housing, Consumer Sentiment, & Spending

The Bloomberg-Nanos Weekly Canadian Confidence Index advanced to 53.2 from 52.2 for the week ending August 21, which is the fastest increase since May 2014.

The improvement in consumer confidence was attributed to expectations that home prices still have breathing space to go higher. Also, it seems like “households have already priced in their concerns about the energy sector’s impact on the Canadian economy.”

Speaking of housing, Canada’s New Housing Price Index (NHPI) for June increased by 0.3% to 113.0 (112.7 previous) due to large gains in Ontario.

The total value of building permits for June, meanwhile, jumped by a whopping 14.8% to CA$7.7 billion after dropping by 13.9% back in June, which is why forex traders understandably jumped on the Loonie when the reading was released.

Forex - Canadian NHPI

As for retail sales, sales value was up by 0.6% to CA$43.2 billion in June, which is slower than May’s 0.9% increase. An increase is still an increase, though, so it’s all good.

According to the report, 8 of the 11 sub-sectors posted an increase in sales value, but the main driver for the increase was, surprisingly enough, a 2.6% increase at gasoline stations, which contributed around CA$4.8 billion to the total sales value.

Forex - Canadian Retail Sales

Business Conditions & Sentiment

As I pointed out in my latest Global Manufacturing PMI Update, Canada’s manufacturing PMI reading dropped to 50.8 in July after climbing to 51.3 in June.

I also pointed out that Markit’s economists pointed to a drop in employment levels despite rising levels of production and new order volumes brought about by “exchange rate depreciation and stronger U.S. consumer spending” as the main reason for the drop.

I guess this ties up nicely with the government’s employment data since the manufacturing sector lost 4.6K or 0.3% of its workers for the month of July.

Moving right along, the Richard Ivey School of Business’ PMI reading for July was synchronized with Markit’s PMI reading since the former also saw a decline from 55.9 to 52.9.

Looking at the four major components, the employment index dropped from 50.7 to 49.1 while the inventories index dropped from 48.9 to 41.2. The deliveries index also dropped from 48.8 to 47.6 while the prices index actually increased from 59.4 to 61.7.


Canada’s CPI only increased by 0.1% month-on-month for the month of July (+0.2% previous), but the year-on-year reading was more impressive since it advanced by 1.3% after posting a 1.0% increase previously.

Forex - Canadian CPI

Year on year, seven of the eight major components saw an increase, with alcoholic beverages and tobacco products leading the way (+3.5%).

This is followed by household operations, furnishings, and equipment (+3.3%) and foodstuffs (+3.2%). The main drag was the 1.7% decrease in the transportation component due to falling gasoline prices.

Forex - Canadian CPI Contributions
Source: Statistics Canada

Summary & Potential Effects on the Forex Market

Overall, Canada’s most recent economic figures ain’t too bad, but the string of decreases in GDP growth is rather worrying. Some pundits are even claiming that Canada is already in a recession or on the verge of heading into one, which would likely cause some forex traders to take a bearish stance on the Loonie.

And while the BOC did state that “Canada’s economy is undergoing a significant and complex adjustment” to be less dependent on oil and other energy commodities, that will take some time and oil prices hovering near six-and-a-half-year lows ain’t exactly helping.