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How y’all doing, forex friends?

Pip Diddy has noted in his Top Forex Market Movers of the Week that Loonie pairs have temporarily decoupled from oil prices on at least two recent occasions, usually after economic reports are released.

And since most of Canada’s economic reports for the month are out, I thought I’d give y’all an overview of Canada’s economy with this latest edition of my economic snapshot.

Note: As with all of my other Economic 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 GDP grew by 0.6% quarter-on-quarter during Q1 2016, which is faster than Q1’s downward;y revised 0.1% rate of expansion.
  • On an annual basis, Canada’s Q1 GDP grew by 1.1%, picking up the pace from the previous quarter’s 0.3% pace.
  • The year-on-year reading for Q1 GDP growth broke the trend of ever slowing growth after peaking at 3.1% back in Q4 2013.
  • Meanwhile, the quarter-on-quarter reading is the highest in five quarters.
  • The quarter-on-quarter reading jumped because of the higher output from the service sector (+0.6% vs. +0.5% previous), and a recovery in the goods-producing sector (+0.2% vs. -0.8% previous).
  • The recovery in the goods-producing sector was due mainly to higher output from mining and oil extraction (+0.5% vs. -1.6% previous), as well as manufacturing (+0.5% vs. +0.1% previous).
  • No detailed breakdown using the expenditure approach yet, but available data shows that business investment contracted by 0.37%.
  • Business investment contracted for the fifth consecutive quarter, which is going to be bad for Canada in the long-run.
  • On a more upbeat note, the 0.37% slide in Q1 2016 is slower than the 1.67% drop in Q4 2015.
  • Canada’s monthly GDP readings point to a potential slowdown in Q2.
  • This is to be expected, though, thanks to the Wildfires that ravaged oil-rich Alberta in May
  • GDP edged up by a mere 0.1% month-on-month in April.
  • GDP then slumped 0.6% month-on-month in May.


  • The Canadian economy shed 31.2K jobs in July after a small loss of 0.7K back in June.
  • This is the largest net loss in jobs since November 2015.
  • Looking at the details of the jobs report, the net decrease in jobs was due to a huge loss of 71.4K full-time jobs, which was offset by the 40.2K increase in part-time jobs.
  • This is the largest loss of full-time jobs in 58 months.
  • Canada’s labor force participation rate fell to 65.4% due to the labor force contracting from 19,380.8K to 19,368.0K in July, even though the working-age population grew.
  • The reading for the labor force participation rate is the lowest ever since November 2019.
  • Despite the fall in the participation rate, the jobless rate ticked higher from 6.8% to 6.9%, as the number of unemployed increased from 1,326.3K to 1,344.8K.


  • Canada’s headline CPI declined by 0.2% month-on-month in July, which is the first negative reading in seven months.
  • This also marks the second consecutive month of worsening readings after peaking at +0.4% back in May.
  • The decline was apparently due to a 1.6% fall in the cost of clothing and footwear, as well as a 1.6% fall in transportation costs.
  • Year-on-year, headline CPI advanced by 1.3%, which is slower than June’s 1.5% pace and a four-month low.
  • The core reading, meanwhile, maintained its 2.1% pace for the third month running.
  • The lower annual headline reading was due mainly to the larger decline for the energy index (-7.4% vs. -4.4% previous).
  • The energy index is stripped from the core reading, which is why the rate of increase for the core reading was maintained.
  • As for the steeper decline in the energy index, that was due primarily to cheaper gasoline prices (-14.0 vs. -8.5% previous).

Business Conditions & Sentiment

  • The RBC-Markit manufacturing PMI reading in July came in at 51.9, which is an uptick from June’s 51.8.
  • This marks the fifth consecutive month that the PMI reading has been above the 50.0 stagnation level.
  • According to commentary from the PMI report, the uptick was due to “modest rises in output, new orders and employment levels.”
  • However, domestic demand was the main driver since exports continued to fall.
  • The PMI report noted that the “latest rise in staffing levels was the joint-fastest since December 2014.”
  • This obviously contradicts the government’s employment numbers, which I already discussed earlier.
  • Moving on, the comprehensive Ivey PMI for July jumped from 51.7 to 57.0, a six-month high.
  • The jump in the headline reading was apparently due to the employment index rapidly rising from 52.5 to a seven-month high of 59.5.
  • Like the reading from RBC-Markit, this is at odds with the actual government data.
  • The prices index did dip from 59.7 to 57.5, though, and that at least somewhat coincides with the government’s weaker inflation readings for July.

Consumer Spending

  • The headline value of retail sales fell by 1% month-on-month in June after two months of gains.
  • Sales declines were reported by 7 of the 11 sub-sectors.
  • In terms of volume, retail sales decline by 0.3% month-on-month.
  • The main drag came from the 1.5% decline in retail sales from food and beverage stores (+2.1% previous).
  • The main driver, meanwhile, was the 2.0% increase in sales from motor vehicle and parts dealers (-2.0% previous).
  • Sales from motor vehicle and parts dealers are stripped from the core reading, which is why the reading is worse compared to the headline reading.
  • Year-on-year, headline retail sales increased by 2.7%.
  • However, this is lower than the 3.6% reading for May.
  • The lower year-on-year reading was due mainly to lower sales from food and beverage stores (1.4% vs. 2.9%% previous) and gasoline stations (-6.4% vs. -5.1% previous).
  • All retail sales readings have been deteriorating for two straight months now.
  • Both the annual and monthly headline readings have been trending lower after both peaked in January 2016.


  • Canada’s trade deficit widened from $3,504.2 million to $3,632.4 million in June.
  • That’s in Canadian dollars or Loonies, by the way.
  • This is the biggest trade gap ever on record since records began in the 1970s.
  • The wider trade gap was even more disappointing when it came out because the consensus was that it would narrow.
  • The wider trade deficit in June was due to imports expanding faster than exports (+0.57% exports% vs. +0.81% imports).
  • Exports to the U.S., Canada’s main export destination, actually decreased by 1.2%, but this was more than offset by the large 31.5% increase in exports to the U.K., which is why exports still increased.

Canadian Economy: Growth

Canadian Economy: Employment

Canadian Economy: Inflation

Canadian Economy: Business Conditions & Sentiment

Canadian Economy: Consumer Spending

Canadian Economy: Trade

Putting it all together

Canada’s GDP growth accelerated in Q1 2016, but available economic reports for Q2 are pointing to a slowdown. For one, the monthly GDP reading slumped by 0.6% in May, likely because of the wildfires in Alberta.

Another reason is that consumer spending deteriorated during the Q2 months. Yet another reason is that the trade deficit in June was the widest ever on record, so trade will likely be a drag to GDP growth.

And Q3 is starting off on a bad foot because of the very poor jobs data. Although the poor jobs report admittedly does not automatically translate to weaker consumer spending or industrial output.

As for inflation, Canada’s inflation problems aren’t as bad when compared to the other major economies. Also, the recent reading of 1.3% still within the BOC’s target range of 1-3%, albeit close to the lower bound. Still, headline inflation readings did weaken in July.

Overall, Canada looks to be in relatively poor health, particularly with regard to growth. This has probably been priced-in already, though. After all, the BOC did warn during the July BOC statement that Q2 GDP may even take a trip into negative territory on a quarter-on-quarter basis before recovering in Q3.