“A weak third quarter and continued problems in Canada’s oil industry leave the near-term growth outlook shaky, but we don’t expect a material turn for the worse,” ING analysts note. “We still expect positive growth in October and a robust manufacturing sector should help keep growth on track.”
Key quotes
“Though our October forecast is still for decent growth, it could be better if it weren’t for transportation constraints and inventory build-ups in Canada’s oil industry weighing on both oil extraction and exports. A glimpse of this can be seen in Canada’s trade data: The trade deficit widened to CAD1.17 billion in October – largely driven by a 1.2% fall in exports.”
“Going forward, Canada’s robust manufacturing sector should prop up growth. The manufacturing PMI ticked up to 54.9 in November (from 53.9 the previous month), which is likely a lagged effect of a United-States-Mexico-Canada-Agreement sentiment boost. This reassures us that, despite the materially weaker outlook for the energy sector, manufacturing should remain strong in response to solid levels of both domestic and foreign demand.”
“Our 2018 growth estimate has been revised down to 2.5% due to a worse-than-expected third quarter, but don’t let that take the shine off things. This print is still solid, and with the central bank’s three main core inflation measures still averaging 1.9% in November, the Bank of Canada will likely carry on tightening policy rates throughout next year.”
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