Canadian Economic Figures Show Mixed Results

Alan Penny

22 January 2020

3 min read

  • CPI figures released earlier today
  • The results came out mixed all over the place
  • Canada to play second fiddle to US and China

Early on Wednesday, the Canadian government released several figures from the economy that showed just how mixed the situation is in the Great White North.

The fact that the announcements were all over the place demonstrates just how difficult the job of the Bank of Canada is when it comes to managing the Canadian economy. This was released just a couple of hours ahead of the monetary policy statement and the interest-rate statement.

It’s also an indication of just how sensitive Canada is to the rest of the world as a large exporter of energy and other products, such as timber and gold.

The economic releases

Consumer Price Index month-over-month came out flat as anticipated, as Ottawa continues to see inflation do very little on the headline number. Core CPI year-over-year came out at 2%, slightly better than the 1.9% expected, while Median CPI year-over-year came in at 2.2%, as opposed to 2.4% as anticipated. Furthermore, the previous month in the Median CPI figures were downgraded from 2.4% down to 2.3% at the time of release.

These announcements show just how all over the place the Canadian economy truly is, being so sensitive to oil markets and other commodities such as timber

Trend CPI year-over-year also came out at 2.1%, less than the 2.2% expected by the market. Wholesale Sales month-over-month came out at -1.2%, much less than the anticipated -0.2%, giving the central bank something to worry about when it comes to consumption by the general public. Finally, Core CPI month-over-month came out at -0.4%, which was very weak to say the least. It is measured in the same way the Americans measure CPI, which is minus food and energy.

These announcements show just how all over the place the Canadian economy truly is, being so sensitive to oil markets and other commodities such as timber. A perfect example of this might be the fact that US housing starts jumped 16% during the month of December, driving up demand for Canadian timber. Gold has been slightly bullish as of late, but at the same time crude oil markets have been very volatile, sowing the seeds of doubt in the oil industry.

The path going forward

Unfortunately, Canadian economic sentiment will be difficult to measure, and it’s very likely that the Bank of Canada isn’t in a situation where there is a lot of clarity to work with. The bank will more than likely continue to be somewhat soft, but that goes in line with the rest of the world.

With a population of just 30 million, Canada isn’t big enough to be quite as insulated as the United States is, at least for a while. However, Canada and Canadian equities may continue to be attractive due to the fact that the Canadians send 80% of their exports into the US, which continues to do reasonably well.

Being in the North American region does still have its benefits, and therefore Canada will continue to outperform other places such as the European Union, United Kingdom, and Australia. However, it will still play second fiddle to other places such as China and the United States. Expect a lot of choppy behavior out of Canada.

Written By
Alan Penny

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