Today's advanced reading on GDP suggested a flat reading for Q3 following a slight contraction in Q2. That's much softer than the Bank of Canada's forecast for +0.8% GDP growth
Goods-producing industries have been in decline for five consecutive months, with agriculture notably down due to dry conditions in Western Canada and CIBC warns that could understate strength in the economy.
Overall though, they think the Bank of Canada is done hiking and will increasingly tilt towards rate cuts.
While Q3's weakness can be partly chalked up to the decline in agricultural production and fire/strike disruptions early in the quarter, the underlying trend of consumer spending also appears very weak with retail sales declining and the post-pandemic recovery in accommodation and food services stalling. The fact that this weakness is happening at a time when population growth has been so strong, and before the majority of homeowners have yet to be exposed to higher interest rates, is a clear signal that rates will have to come down next year to avoid an even worse outcome (we currently expect the first move lower in Q2 next year).
USD/CAD hit a one-year high today and I suspect it has much further to go.
USDCAD daily