CAD: Setting up for Real GDP – TDS
Research Team at TDS, suggests that following a sizzling start to the
year which saw activity grow at the fastest pace since July 2013, the
Canadian economy is likely to stall in February with real industry-level
GDP forecast to remain unchanged from the prior month.
“Data for February has been highly segmented, with a sharp correction in manufacturing volumes offset by a robust retail sector and record existing home sales. For this reason, growth will be driven by industries in the services sector while we are biased to see a retrenchment in goods-producing industries.
On an industry-level basis, manufacturing should be especially weak, reversing January's 1.9% advance, while lower railcar shipments indicate a slight pullback in commodities. Construction should provide a slight offset due to the significant rebound in housing starts during the month. On the services side, retail trade should see a strong gain after a 1.5% m/m increase in retail sales volumes while accommodation and food services will benefit from a depreciated Canadian dollar and the NBA all-star weekend in Toronto.
For the quarter as a whole, annualized real GDP continues to track well north of the Bank of Canada’s 2.8% forecast (TD: 2.9%). With economic momentum set to slow over the balance of the quarter, the Q1 tracking will also fall and real GDP will show a clear deceleration heading into Q2. While this will likely dent the market’s optimism regarding the health of the Canadian economy, growth will not weaken to the extent that the Bank of Canada will contemplate moving off of the sidelines.”