Partner Center Find a Broker

How y’all doing, forex buddies? The Loonie was able to hold its own against its forex rivals during the previous trading week, thanks to relatively cheaper commodities due to the weaker Greenback, as well as positive events related to oil, such as the announcement that OPEC and non-OPEC producer are gonna have a little huddle on April 17.

Anyhow, if the Loonie’s recent strength made you think about how Canada’s economy is doing, then this Forex Snapshot is just what you need.

Note: As with all of my other Forex Snapshots, there are nifty tables at the bottom, so you can skip to those if you’re a forex trader who’s in a hurry. The bullet points provided highlight the underlying details and trends that give the numbers their proper context, however.


  • Canada’s Q4 2015 GDP grew by 0.2% quarter-on-quarter, which is slower than Q3’s growth pace of 0.6%.
  • Year-on-year, Canada’s Q4 2015 GDP only grew by 0.5%, which is a disappointment when compared to the previous quarter’s 1.1% annual growth.
  • The year-on-year reading for GDP growth has been trending lower after peaking at 3.1% back in Q4 2013.
  • The current year-on-year reading is also the slowest on record since Q4 2009 when GDP was in negative territory. That’s a heck of a long time.
  • The slower quarter-on-quarter GDP growth was mainly due to a 1.7% slump in business investments (-1.3% previous) and a 0.6% decline in exports (+2.6% previous).
  • Business investments have been been in decline for four consecutive quarters now, with the main drag being the “non-residential structures, machinery, and equipment” component.
  • The continuing decline in the aforementioned component is a bad sign for Canada’s economy since that the decline may mean that investors are not investing in other industries or that the unwinding of investments in the energy sector is outpacing investments in other sectors.
  • In terms of output, good-producing industries were in the red during Q4 2015, with agriculture being the only exception since it was up by 2.3% (2.4% previous).
  • Mining, quarrying, and oil and gas extraction was down by 2.1% after a 4.8% rise back in Q3
  • Construction was down by 1.4% (-0.7% previous). Construction has been declining for four consecutive months now.
  • Manufacturing was down by 0.3% after advancing by 0.8% previously.
  • The service sector. which account for a large chunk of Canada’s GDP in term of output, grew by 0.5% (0.3% previous).


  • Canada’s economy saw a net loss of 2.3K jobs in February, which is not as bad when compared to the net loss of 5.7K jobs back in January.
  • A closer look shows that February’s net loss was actually due to a massive loss of 51.8K full-time jobs, which was partially offset by the 49.5K gain in part-time jobs.
  • In contrast, January’s net loss in employment was due to a loss of 11.3K part-time jobs overshadowing the 5.6K gain in full-time jobs.
  • February’s decrease in full-time jobs is the biggest in five months, which is bad for Canada’s economy since full-time jobs generally offer better wages and security when compared to part-time jobs.
  • The job losses were mostly centered on the service sector (-44.5K vs. +19.7K previous), namely, educational services (-16.9k vs. +3.2K previous) and healthcare (-19.6K vs. +11.3K previous).
  • Interestingly enough, manufacturing saw a net increase of 7.6K jobs (-11.0k previous), and the same can be said for construction (+34.0K vs. -5.4K previous). The resources sector saw a net loss of 8.9K jobs, though (+1.4K previous).
  • The net loss in February was apparently enough to push the jobless higher to 7.3%, which is the highest reading ever since March 2013.
  • The labor force participation rate held steady at 65.9%, so Canadians aren’t too discouraged yet.


  • Canada’s headline CPI increased by 0.2% month-on-month in February, which is the same pace as back in January.
  • Year-on-year headline CPI only increase by 1.4%, which is lower than the 2.0% reading for January.
  • The core reading advanced by 1.9%, which is slightly lower than the core reading for January, which is 2.0%.
  • The lower year-on-year headline reading is a disappointment because it broke three consecutive months of faster CPI increases, with January’s 2.0% reading being a 14-month high.
  • The slower year-on-year headline reading was primarily due to the 13.1% drop in gasoline prices (+2.1% previous).
  • If gasoline prices are stripped, we get a core reading of 1.9%.
    Another major drag was the “clothing and footwear” component since it was down by 1.3% (-0.3% previous).

Business Conditions & Sentiment

  • The RBC-Markit manufacturing PMI reading for the February period ticked higher from 49.3 to 49.4.
  • This is a seven-month high, so you probably already guessed that Canada’s manufacturing sector has been contracting for seven months now.
  • According to the report from RBC-Markit, manufacturing output dropped for the seventh consecutive month while new orders declined for the sixth consecutive month, but exports picked up for the fourth straight month, citing the Loonie’s relative weakness in recent months.
  • This implies that domestic demand is deteriorating.
  • Payroll numbers also dropped and the rate of job shedding even accelerated in February, which contradicts the government numbers for February.
  • Factory gate prices increased, however, which lines up with the government’s inflation numbers for February.
  • Moving on, the comprehensive Ivey PMI for February dipped to 53.4 from a three-year high of 66.0. It’s still above the 50.0 stagnation level, though.
  • All sub-indices likewise dipped, with the employment index at 50.3 (55.1 previous), the inventories index at 49.9 (61.4 previous), and the prices index at 57.8 (71.6 previous).
  • Incidentally, the lower employment index for February corresponds to the weak jobs data, and the same can be said for the prices index and inflation.


  • Canada’s trade deficit widened slightly from $631 million to $655 million. That’s in Canadian dollars or Loonies, by the way.
  • This slight widening of the trade deficit ended two consecutive months of tightening.
  • The wider deficit was due to exports increasing only by 1.02% after growing by 3.94% previously.
  • In contrast, imports grew by 1.06% after growing by 1.40% previously.
  • Export to the U.S., Canada’s main trading partner, increased by 2.6% (2.9% previous).
  • However, exports to countries other than the U.S. declined by 3.7% after a 7.0% increase previously, which is why exports slowed down in January.

Consumer Spending

  • Headline retail sales rebounded by 2.1% month-on-month in January (-2.1% previous), with gains being reported in 7 of the 11 sub-sectors.
  • Year-on-year, headline retail sales soared by 6.4%, which is almost a six-year high.
  • The main driver was the 4.8% increase reported by motor vehicles and parts dealers, with the 5.3% increase from new car dealers being the main contributor.
  • General merchandise stores also finally saw an increase in retail sales (+4.9%) after three months of declines.
  • Eight provinces reported increases in retail sales, which is great since all provinces reported declines in retail sales back in December, with the exception of Prince Edward Island.


  • The value of building permits issued in January was only $6.4 billion, which is 9.8% lower when compared to the previous month.
  • The value of permits for multi-family housing slumped by 21.0% after jumping by 27.7% back in December, which implies lower construction intentions, and possibly lower demand for housing.
  • The value of permits for commercial buildings also fell by 7.1% after a 12.5% previously, with retail buildings and warehouses accounting for most of the declines.
  • The value of permits for industrial construction did increase by 30.6% after a 12.9% decline back in December, with noticeable increases coming from Alberta and Ontario.
  • The new housing price index increased by 0.1% to 114.2 in January.
  • The new housing price index has been advancing non-stop for ten consecutive months now.
  • Despite lower residential construction intentions in January, the seasonally adjusted annualized reading for Canada’s housing starts increased by 213K units while the previous reading was revised slightly lower from 166K to 165K.

Forex Snapshot - Canada's Economy: GDP Growth

Forex Snapshot - Canada's Economy: Employment

Forex Snapshot - Canada's Economy: Inflation

Forex Snapshot - Canada's Economy: Business Conditions & Sentiment

Forex Snapshot - Canada's Economy: Trade

Forex Snapshot - Canada's Economy: Construction

Forex Snapshot - Canada's Economy: Consumer Spending

Putting it all together

Canada’s GDP growth got hit back in Q4 2015, but business conditions and sentiment remained upbeat for the Q1 2016 months and Canada’s economy continues to expand, although the manufacturing sector is still contracting a bit.

Consumer spending also started the year on a strong footing, but it remains to be seen if the deteriorating labor conditions will affect consumer spending down the road.

Building permits for industrial construction also jumped in January, which is a good sign that Canada’s economy is beginning to move away from being too dependent on oil exports.

And if you read the bullet points above instead of jumping here or the tables, then you know that this is significant because the decline in business investments was one of the main drags for Canada’s Q4 2015 growth.

Overall, Canada’s economy is still in bad shape, especially Canada’s labor market. But there are promising signs that investors are, uh, investing in other industries. In the meantime, the oil rally in the past few weeks will probably help to alleviate Canada’s pain.