Canadian economic forecasters will tap a gold mine of illuminating economic data this week, as fresh numbers covering critical ingredients for Canada's economic recovery will shed considerable light on whether the economy's recent pick-up has staying power.
Following last week's strong gross-domestic-product report for January (up 0.6 per cent month over month), pundits and policy makers will get updates on the state of trade, jobs and business sentiment – three vital components for sustaining the upturn that the economy has enjoyed not only in January, but for much of the past six months. The new numbers will be particularly timely for the Bank of Canada, as it spends the week in deliberations ahead of its interest-rate decision and quarterly economic-outlook update on April 12.
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Business Outlook Survey to signal investment plans
Monday gets the week rolling with the Bank of Canada's quarterly Business Outlook Survey, which has become a must-read as the economy continues to struggle with business investment, a key missing element for Canada's sustained growth.
Companies' spending last year on non-residential buildings, machinery and equipment was down nearly 20 per cent from two years earlier, and has remained tepid in recent quarters, even amid signs that the investment slump in the battered oil and gas sector has bottomed.
The previous survey, released in January, indicated a healthy improvement in companies' investment intentions over the next 12 months, although the central bank cautioned that the upturn largely reflected fewer companies planning to reduce spending, rather than growing numbers anticipating increases. Statistics Canada's annual investment-intentions survey – which is based on a much larger sample of firms – suggested that the private sector is poised for a third straight yearly decline in capital spending, albeit a small one.
Meanwhile, Bank of Canada Governor Stephen Poloz said in a news conference last week that uncertainty surrounding U.S. trade policies could restrain business investment this year, as the Trump administration pushes for renegotiation of the North American free-trade agreement.
"It's going to depend from company to company whether they have the confidence to do [an] expansion when NAFTA may change," Mr. Poloz said.
Another trade surplus seen, but smaller
Tuesday features Canada's merchandise-trade data for February. After more than two straight years of monthly deficits, trade has racked up a cumulative surplus of $2.5-billion over the previous three months. Economists expect a fourth straight surplus in February, helped in part by higher oil prices, but the consensus call is the surplus to narrow a touch to about $700-million, from $807-million in January.
The critical signpost, as far as economic growth is concerned, will be export volumes, which speak to foreign demand for Canadian goods. After slumping last spring, exports have grown on a value basis by an impressive 12.5 per cent over the past eight months, but volume growth has been a more modest 4.6 per cent, and has shown plenty of month-to-month choppiness. Non-energy export volumes will garner particular attention, as the Bank of Canada continues to look for a rotation of the economy toward non-energy exports to pick up the slack for the battered oil and gas sector.
Canadian Imperial Bank of Commerce economist Nick Exarhos warned that exports could be in for a step back in the February trade report. He noted that advance February trade data from the United States, the destination for roughly three-quarters of Canada's exports, showed a 2-per-cent slump in imports in the month.
Jobs due for a timeout from strong run
The week wraps up with Friday's release of Statscan's monthly labour-force survey for March.
Job creation has been fast and furious in recent months – more than 250,000 since last July, and more than 100,000 in the three months preceding March. But economists are betting on a pause last month; their consensus forecast is for an inconsequential 3,000-job increase.
But economists will be looking for evidence of improved quality in the job market, specifically whether the jobs are skewed toward full-time rather than part-time hiring. Roughly two-thirds of the new jobs created last year were part-time, placing a big asterisk on the strength of the labour market. But February reversed that trend in a big way, with full-time jobs surging 105,000 while part-time employment fell 90,000.
"We'll see what kind of volatility the March report serves up," said Bank of Montreal economist Benjamin Reitzes.
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