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How y’all doing, forex friends? Pip Diddy noted in his latest Top Forex Market Movers that the Loonie was able to come out mostly on top, even though oil was down in the dumps. Not only that, Canadian PM Justin Trudeau also vowed to work with a Trump presidency and “move forward in a positive way.” If that made you wonder how Canada’s economy is faring recently, then this Economic Snapshot is just for you.

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 contracted by 0.40% quarter-on-quarter in Q2 2016 after posting a 0.62% expansion in Q1.
  • This is the first contraction in four quarters.
  • Moreover, the current reading is also the poorest quarterly reading since Q2 2009.
  • On an annual basis, Canada’s Q2 GDP grew by 0.88%, slowing from the previous quarter’s 1.16% rate of expansion.
  • Looking at the details of the GDP report, the quarter-on-quarter reading became negative primarily because of the 2.9% contraction in industrial production (+0.6% previous).
  • The downturn in industrial output, in turn, was due mainly to the 6.7% slump in mining and oil and gas extraction (+0.3% previous), as well as the 1.2% drop in manufacturing output (+0.7% previous).
  • Using the expenditure approach, the main drags to the quarterly reading were the 0.12% slide in gross fixed capital formation (-0.11% previous) and the 4.45% slump in exports (+1.94% previous).
  • Gross fixed capital formation (net investment) has been in negative territory for six consecutive months as of Q2 2016.
  • The fall in gross fixed capital formation has been due mainly to declining investment on non-residential structures and industrial machinery and equipment.
  • For the weaker year-on-year reading, that was due to the 4.92% drop in exports, which is a harder drop compared to the previous 0.85% slide.
  • On a more upbeat note, Canada’s GDP grew by 0.4% month-on-month in July and then 0.2% in August, so Q3 GDP looks good for now.


  • Employment in Canada saw a net increase of 43.9K jobs in October, which is fewer than the 67.2K jobs generated in September.
  • Looking at the details of the jobs report, the net increase in jobs was due to the 67.1K increase in part-time jobs, which was partially offset by the loss of 23.1K full-time jobs.
  • This is largest increase in part-time jobs in just over a year, but this is also the first loss of full-time jobs after two straight months of increases.
  • Canada’s labor force participation rate ticked higher from 65.7% to 65.8%, as the labor force increased by 149.3K to 19,525.7K.
  • This is the highest participation rate in six months.
  • Moreover, the labor force participation rate has been climbing for three consecutive months now.
  • Despite the large influx of workers who joined or rejoined the labor force, the number of unemployed only increased by 9.7K to 1,363.1K.
  • This is why the jobless rate held steady at 7.0% for the third month running.
  • In addition, this means that the Canadian economy was able to absorb the influx of workers, which is great news.


  • Canada’s headline CPI recovered by 0.1% month-on-month in September, after falling for two consecutive months.
  • The monthly increase in September was mainly due to the 0.8% increase in the cost of recreation and education (-0.4% previous), as well as the 0.1% in the cost of transportation (-0.5% previous).
  • Recreation and education account for about 10.89% of CPI, while transportation accounts for around 19.10% of CPI.
  • The main drag came from the 1.3% slump in the price of food items (-0.6% previous).
    Food accounts for about 16.41% of CPI.
  • Year-on-year, headline CPI increased by 1.3% after dipping to 1.1%, which is the lowest annual reading in 10 months.
  • Even better, the rebound breaks the two-month downtrend.
  • Anyhow, the rebound was due mainly to the 2.3% jump in transportation costs (+0.3% previous).
  • The jump in transportation costs, in turn, was primarily because of the softer fall in the price of gasoline (-3.2% vs. -11.5% previous).
  • The slower increase in the cost of services is also the primary reason why the core reading, which strips energy and food prices, took a hit (+1.8% vs. +2.1% previous).
  • Gasoline is excluded from the core reading, which is why the core reading remained unchanged at the two-year low of 1.8%.

Business Conditions & Sentiment

  • The RBC-Markit manufacturing PMI reading for October came in at 51.1, an improvement over September’s 50.3 reading.
  • The PMI reading has been above the 50.0 stagnation level for eight consecutive months now.
  • According to commentary from the PMI report, the higher reading was due to “a slight improvement in overall business conditions, driven by a renewed rise in new work and greater employment numbers.”
  • However, additional commentary noted that it was “another challenging month for the Canadian manufacturing sector, with production volumes stagnating amid subdued demand patterns and ongoing efforts to reduce finished goods inventories.”
  • Moving on, the comprehensive Ivey PMI for October jumped from 58.4 to 59.7, a nine-month high.
  • The jump in the headline reading was apparently due to a broad-based jump across the indices, excepting the deliveries index, which fell from 51.7 to 49.2.
  • The inventories index rapidly rose from 46.7 to 53.5, and the prices index jumped from 56.8 to a five-month high of 61.5, while the employment index advanced from 54.0 to 57.3.
  • It’s worth pointing out that the higher employment index for October contradicts the actual employment numbers, since jobs growth in October was weaker compared to September, as noted earlier.
  • The jump in the prices index, meanwhile, could be a sign of even higher inflation.
  • The rise in the deliveries index doesn’t look too good, though, since the deliveries index fell, which implies weaker demand in October.

Consumer Spending

  • The headline value of retail sales fell by 0.1% month-on-month in August after falling by 0.2% in the previous month.
  • On a monthly basis, retail sales have been in negative territory for three straight months already.
  • Sales declines were reported by 7 of the 11 sub-sectors.
  • In terms of volume, retail sales also fell by 0.3% month-on-month, so the weaker reading in August was really due to weaker demand, and not just cheaper prices.
  • The main drag came from the 0.5% tumble in vehicle sales (-0.2% previous).
  • Motor vehicle and parts sales account for roughly a quarter of total retail sales.
  • Sales from motor vehicle and parts dealers are stripped from the core reading, which is why the core reading improved compared to last month (0.0% vs. -0.1% previous).
  • Year-on-year, headline retail sales increased by 1.6%.
  • This is the weakest reading in 10 months.
  • Furthermore, the annual reading has been trending lower for four consecutive months already.
  • The lower year-on-year reading was due mainly to lower sales of vehicles and parts (1.8% vs. 4.2% previous).


  • The total value of building permits issued in September was only $6.9 billion, which is down by 7% when compared to the previous month.
  • The value of building permits for residential buildings increased by 2.6%, which may contribute to a potential housing bubble in Canada.
  • Worse still, the slump in the headline reading was due to the value of non-residential building permits plunging by 22.3%.
  • And it was a broad-based plunge, too.
  • Industrial building permits dropped by 27.1%, commercial building permits was down by 20.8%, and institutional building permits fell by 22.3%.
  • Looking forward, the number of housing starts in October was only 192.9K units, which is fewer than the previous month’s 219.4K increase.
  • Canada’s new housing price index (HPI), meanwhile, continued to trend higher.
  • HPI for July came in at 116.7, which is a record high.
  • HPI has been trending higher since 2009.


  • Canada’s trade gap widened from $1,991.5 million to $4,080.4 million in September.
  • This is the biggest trade deficit ever on record.
  • That’s in Canadian dollars or Loonies, by the way.
  • The larger deficit was due to imports soaring by 4.69% to a a record high of $47,629.5 million.
  • According to the trade report, the surge in imports was due to “to one large import of a module from South Korea destined for the Hebron offshore oil project in Newfoundland and Labrador. No additional high-value import transactions are expected for this project.”
  • Additional commentary noted that “Excluding the $2.9 billion change in imports of industrial machinery, equipment and parts in September, total imports would have decreased 1.6%, resulting in a trade deficit of $1.2 billion.”
  • Looking at the export side of the equation, exports only increased by 0.10% to an eight-month high of $43,549.1 million.
  • Exports to the U.S., Canada’s primary trading partner, fell by 0.6% to $32,384 million.
  • The U.K., meanwhile, became the second largest export destination, with exports rising by 9.3% to $2,053 million.
  • China moved down to third place, thanks to exports falling by 10.5% to $1,745 million.

Canadian Economy: Growth

Canadian Economy: Employment

Canadian Economy: Inflation

Canadian Economy: Business Conditions & Sentiment

Canadian Economy: Consumer Spending

Canadian Economy: Housing

Canadian Economy: Trade

Putting it all together

Canada’s economy took a hit in Q2. However, Q2 was widely expected to be bad quarter. Heck, the BOC been warning about the possibility of a negative reading because of the Alberta wildfires since the July BOC statement.

Looking forward, Canada’s Q3 GDP is looking good so far, with GDP growing by 0.4% month-on-month in July and then 0.2% in August. However, September is expected to be a bad month, given that the trade gap in September was the widest ever on record.

On the brighter side of side of things, the wider trade gap was due mainly to the import of industrial machinery. That will likely cause the “gross fixed capital formation” component to increase, which would hopefully substantially offset the expected negative impact of trade.

As for inflation, there was a broad recovery in September after a rather weak showing in August. The annual headline reading’s climb, in particular, managed to put an end to a two-month downtrend. However, the reading of 1.3% is still scraping the bottom of the BOC’s target inflation range of 1-3%.