Here's an interesting chart from BMO and speaks to a theme I highlighted at the start of the year: That other countries are more rate-sensitive than the US and would slow down first.
Canada, Australia and the UK are particularly sensitive to higher mortgage rates and this chart shows some troubling trends in Canadian railcar traffic. It shows the four-week moving average down 5.6% compared to a year ago and none of the usual spring ramp up. The latest Canadian retail sales report was also soft.
Now, I'm careful to draw too much from this because there are some very real skews in spending on goods vs services coming out of the pandemic but the place to watch for rate hikes biting first isn't the US, it's elsewhere.
Here's BMO's take:
Weakening railcar volumes are providing an early sign that the Canadian economy is starting to cool off, particularly for goods-related sectors. Whether weakening demand for goods manifests into a recession later this year depends on how resilient the labour market and services remain. Pent-up demand for supply-constrained consumer products (like autos) and excess savings could also alter both the timing and magnitude of any downturn, but we still see the economy entering a mild recession after a modest gain in the first quarter.
Today's Canadian GDP data showed growth of 0.6% in Q1 but it was heavily weighted towards January with February at +0.1% and March at -0.1%.
