According to analysts at the Royal Bank of Canada, it’s a light Canadian economic data calendar this week, which is likely to leave attention focused on external trade risks.
Key Quotes
“Key to that will be whether the US follows through with planned 5% across-the-board tariffs on imports from Mexico on Monday, adding to new tariffs on imports from China last month. That would mark another blow for the US manufacturing sector which, we have noted before, has borne the brunt of US import tariffs to date and already posted declines in three of the first four months of 2019. In that respect, the May US industrial production report is perhaps the most consequential economic release on the docket for this week.”
“The US and Canadian manufacturing sectors are incredibly closely integrated. There may be some opportunities for temporary reallocation of supply chains away from US-Mexico trade to US-Canada trade in the event the US follows through on their Mexico tariff threats. But anything that is bad for the US industrial sector – and added tariffs would definitely qualify – would almost certainly also be bad for Canada on net.”
“In Canada, the recent economic data has been downright strong. A 0.5% bounce-back in GDP in March bodes well for a return to growth in the 2% range in Q2 after disappointing growth over the prior two quarters. The 28k gain in employment in May was the 8th in the last 9 months for what is normally a volatile measure with job gains totaling 417k over that period.”
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