Canada Country Profile - Economy, Currency, Central Bank, Canadian Dollar, CAD

Introduction

Canada is the 8th largest economy in the world with GDP valued at C$1.269 trillion in 2006, and a population of 32 million. The country has been growing consistently since 1991. Canada is currently the world's 5th largest producer of gold and the 14th largest producer of oil. However, two-thirds of the country's GDP comes from the service sector, which employs 3 out 4 Canadians. Manufacturing and resources are very important for the Canadian economy, as it represents over 25% of the country's exports.

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Canada's Fundamental Indicators and Chart

Monthly Data for August, 2008

Date	EST	Indicator	Actual	Forecast	Previous
8/6	10:00am	Ivey PMI	65.5	62.5	69.6
		"Ivey Purchasing Managers Index" for July Latest Release from: Purchasing Management Association
8/7	8:30am	Building Permits	-5.3%	-1.0%	2.0% 1.1%
		For June Provided by: Statistics Canada Official Release: News Release From the Release: " In June, the total value of building permits fell 5.3% from May to $6.3 billion, as construction intentions decreased in both the residential and non-residential sectors and in several provinces. In constant dollars, the decline was about the same magnitude at 5.5%. In the residential sector, the value of building permits declined by 4.4% to $3.6 billion. The decrease was generated by lower values in multi-family permits in all provinces except Saskatchewan. In the non-residential sector, the value of permits decreased by 6.6% to $2.8 billion, due to declines in commercial and industrial intentions. Municipalities issued $1.3 billion worth of permits for multi-family housing in June, down 13.8%, a second consecutive monthly decrease. Most of these declines occurred in Ontario and Alberta. At the same time, single-family permits edged up 1.8% to $2.3 billion. In the last four months, the value of single-family permits has remained between $2.2 billion and $2.3 billion."
8/8	7:00am	Employment Change	-55.2K	5.0K	-5.0K
		For July Latest Official Release: Statistics Canada Unemployment Rate: 6.1%, forecast 6.2%, pr. 6.2%, 6.1% The Canadian labor market is slowing significantly. The economy shed 55,200 jobs, 7,100 of which from full-time posts, and a dominant 48,100 from part-time posts. The 55.2K decline is the largest monthly job loss since February 1991. Manufacturing led the cuts, slashing 32,000 in July. Also, job losses were only notable in the private sector, while there were some job growth in the publich sector. The jobless rate improved to 6.1% due to a large number exiting the workforce, especially younger employees. Also hourly wage inflation declined to an annual rate of 4.0% from 4.4% in June. The numbers reflect an economy in the down turn.The two recent months of employment decline is comparable to a period in the 1991 recession. The Canadian dollar has already been soft due to the receding crude oil prices. Another warning from this poor jobs data put further pressure on the Canadian dollar which slipped more than 100 pips against the greenback in the hour following the releas, and continues to be dominated by the dollar after another set of positive US economic release this morning.
8/8	7:00am	Unemployment Rate	6.1%	6.2%	6.2%
		For July Latest Official Release: Statistics Canada Employment Change: pr. -5.0K See "Employment Change" for commentary.
8/11	8:15am	Housing Starts	187K	210K	216K 218K
		For July Provided by: Mortgage and Housing Corporation Current Release: News Release The multiple dwelling segment of housing starts have been picking up the slack in the singles segment. Urban multiples were down 20.2% to 91.600, compared to a 6.6% decline for singles to 69,800 units a year. Combined urban starts decreased 14.8% in July compared to June. From the release: "After a strong first half of the year, the volatile multiple segment is now readjusting itself." said Brent Weimer, Senior Economist at CMHC’s Market Analysis Centre. "This brings activity since the start of the year closer in line with our 2008 forecast of more than 200,000 housing starts for the seventh consecutive year."
8/11	8:30am	New Housing Price Index	0.1%	0.1%	0.0%
		For June Provided by: Statistics Canada Previous Release: News Release HPI y/y: 3.5% pr. 4.1% (May), 5.2% (Apr), 6.1% (Mar) The softening housing market since September of 2006 in Western Canada is a real drag to house prices according to Statistics Canada. The annual pace of 3.5% between June 2007 and June 2008 is the slowest growth since March 2002. Comparing some regional differences, StatCan reported: Homebuyers in the census metropolitan area of Regina continued to experience the largest gains in new home prices. Contractors' prices in Regina increased by 28.5% from June 2007, with continuing labour shortages and increased costs of materials likely playing important roles. In British Columbia, year-over-year prices in Vancouver were up 1.8%, while those in Victoria declined by 0.4%.
8/12	8:30am	Trade Balance	5.8B	5.7B	5.5B
		For June in C$ Provided by: Statistics Canada Official Release: News Release Exports to the US expanded in June, in particular due to an increase of demand for crude petroleum. Otherwise, exports to other parts of the world shrank while imports increased. Energy product exports grew 11.5%, for the either consecutive monthly increase. Both prices and volume grew. Automotive and industrial goods exports also grew.From the release: Canadian companies exported merchandise worth $43.2 billion in June, up 3.1% from the previous month, as prices increased 4.5% and volumes declined 1.4%. Overall, export prices have been on the rise for the past eight months, while volumes have been trending downward. Imports rose 2.0% to $37.4 billion, the third monthly increase in a row and the eighth in the past 12 months. Prices rose 2.6%, while volumes declined 0.6%. Import prices have also been on an upward trend for the past eight months while movements in volume have not shown a clear trend. Exports to the United States rose 5.3% to $32.8 billion, primarily due to greater exports of crude petroleum. Imports also increased, but to a lesser extent, yielding a trade surplus with the United States of $9.6 billion, up from $8.1 billion.
8/15	8:30am	Manufacturing Shipments	2.1%	1.0%	2.7%
		For June Provided by: Statistics Canada Official Release: Press Release From the Release: "In current dollars, Canadian manufacturers reported $52.5 billion in sales, up 2.1% from May and the fifth increase in six months. In constant dollars, manufacturing sales increased 0.6% to $47.0 billion in June. Industrial prices for petroleum and coal, chemical products, wood products, and motor vehicles rose notably during the month. Increases were widespread as 14 of 21 manufacturing industries, representing 81% of total sales, reported gains. The largest contribution to the gains in total manufacturing sales came from petroleum and coal product manufacturers. Sales increased by 6.4% in this industry, mirroring the 6.2% rise in prices observed for the month. Sales by primary metal manufacturers also contributed significantly to the rise in June, gaining 6.1% compared with May. Primary metal sales have increased for eight consecutive months due to strong international demand. Motor vehicle manufacturers posted their fourth gain in six months as sales rose 4.2% in June. Despite the recent strengthening, motor vehicle manufacturing sales only reached $4.2 billion, well below the $5.0 billion monthly average for 2007."
8/15	8:30am	New Motor Vehicle Sales	-1.0%	0.0%	1.1%
		For June Provided by: Statistics Canada Official Release: News Release From the Release: "Dealerships sold 143,270 new vehicles in June, down 1.0% from May. The trend away from trucks to passenger cars continued. Preliminary industry data for July indicate that the number of new motor vehicles sold will remain relatively unchanged. Sales of new trucks (which include minivans, sport-utility vehicles, light and heavy trucks, vans and buses) declined 2.4% to 63,746 units. Lower sales have been observed for this vehicle type since the beginning of the year. Passenger car sales were relatively stable in June with sales of 79,524 units, an increase of 0.1%. North American-built passenger car sales increased for the second consecutive month. Offsetting this increase was a decline in overseas-built passenger cars."
8/18	8:30am	International Securities Transactions	7.3B	6.5B	10.7B
		For June Provided by: Statistics Canada Official Release: News Release From the Release: " Non-residents had net purchases of Canadian securities for a seventh consecutive month in June, as heavy acquisitions of Canadian bonds showed no sign of abating. June's $7.2 billion foreign acquisition of Canadian securities completed a record second quarter investment of $27.6 billion. Meanwhile, Canadians reduced their holdings of foreign securities by $9.5 billion, in the face of lacklustre global equity markets and a deteriorating US credit market. Nearly two-thirds of the divestment was in foreign shares with the rest largely in US government bonds."
8/19	8:30am	Wholesale Sales	2.0%	0.5%	1.5% 1.6%
		For June Provided by: StatCan Official Release: News Release June was a strong month for the automotive products sector, which saw a 10.6% gain to C$7.8B, the largest increase for the sector since August 2005. This came following 6 months, in which 5 saw declines. Motor vehicle sales rose 11.9% to lead the way in the sector.Wholesale inventories are also piling up, a sign of anticipation of growing demand. From the Release: " Current dollar wholesale sales rose 2.0% to $45.2 billion in June, the fifth increase in six months. After removing the effect of price changes, sales in constant dollars increased 1.0% during the month. June's increase of 2.0% was largely a result of higher demand for automotive products. Sales excluding the automotive sector rose 0.4%. Overall, six of the seven wholesale sectors reported higher sales in June. The only decline came in the "other products" sector, which had posted a substantial increase in May. The trend for current dollar wholesale sales has been gradually rising over the past four months. This followed a period of little or no growth that began in mid-2007, which was largely the result of a slowdown in exports of motor vehicles and lumber."
8/20	8:30am	Retail Sales	0.5%	0.3%	0.3% 0.4%
		Monthly Rate for June Provided by: Statistics Canada Official Release: News Release Retail sales yet again improved on the back of soaring gas prices, for the eighth month of gains in the last nine months. Overall retail sales grew 0.5%, limited by the lackluster auto sector, which edged down 0.1% in sales. Excluding autos, retail grew 1.4%. Keep in mind the timeliness of this release to current market sentiments. Oil has declined significantly, and gas prices should soon follow, bringing out the true colors of the economy where demand has contracted. From the Release: "Retail sales in current dollars rose by 0.5% in June to $36.0 billion. This advance can largely be explained by the 4.2% increase in sales at gasoline stations, mainly as a result of higher gas prices in June. Once price variations for all goods and services sold by retailers are taken into account, retail sales in constant dollars decreased by 0.4%. In June, retail sales in current dollars were up in six of the eight sectors. The strongest increases were in the clothing and accessories stores sector and in the food and beverage stores sector. Sales at furniture, home furnishings and electronics stores rose for the third consecutive month, continuing their recovery after slowing in the last six months of 2007. The widespread increase in retail sales was dampened by the fifth consecutive decline in sales by new car dealers, which fell 3.1%... Excluding sales by new car dealers and by used and recreational motor vehicle and parts dealers, retail sales rose by 1.4% in June, the third increase of 1.0% or more since the beginning of the year."
8/20	8:30am	Retail Sales excl. Autos	1.4%	0.5%	0.4%
		See "Retail Sales" for detail
8/20	8:30am	Leading Indicators	0.0%	0.1%	0.0%
		For July Provided by: StatCan Official Release: News Release The housing and manufacturing indexes pulled down gains in the other 7 components that rose. This non-growth disappointed market forecasts of a 0.1% gain. From the Release: "The composite leading index was unchanged for a second straight month in July, after small gains in April and May. Overall, 2 of the 10 components fell in July, versus 6 in June. However, the declines in housing and the average workweek in manufacturing were large enough to offset small increases in the 7 components that rose. The housing index decreased by 2.9%, its largest decline since June 2002. Most of the drop originated in fewer housing starts. Consumer spending on durable goods continued to expand, although the rate of growth for auto sales slowed sharply after the hike in gasoline prices early this summer."
8/21	7:00am	Consumer Price Index m/m	0.3%	0.4%	0.7%
		For July Provided by: StatCan Official Release: News Release CPI y/y: 3.4%, forecast 3.4%, pr. 3.1%, 2.2% (May), 1.7% (Apr) BOC Core CPI m/m: 0.1%, forecast 0.2%, pr. 0.1%, 0.3% (May) BOC Core CPI y/y: 1.5%, forecast 1.6%, pr. 1.5%, 1.5% (May) Canadian consumer prices increased 0.3% for the month of July, easing from the 0.7% seen in June. Still, that caused the annual rate to jump to 3.4%, from June's 3.1%. On the year, gasoline prices are up 28.6%. As the excerpt from the release below reveals, higher gasoline prices were a major factor. Lower prices to purchase and lease passenger vehicles helped to partially offset the impact of rising gasoline prices. Core prices stayed at the same level as June, coming in below forecasts. From the Release: "Consumer prices rose 3.4% in July 2008 compared with July 2007, an increase from the 3.1% rise recorded in the 12 months to June 2008. Higher gasoline prices continued to exert the strongest upward pressure on consumer prices. July saw the highest 12-month increase since March 2003. A climb in gasoline prices was the primary source of higher consumer prices in July. The 12-month variation in the Consumer Price Index (CPI) and the gasoline price index have been increasing at a faster pace over the past four months." With oil increasing for a third day, and high annual inflation figures, the Canadian Dollar advanced in today's trading.
8/21	7:00am	CPI excl. Volatile Items	0.1%	0.2%	0.1%
8/28	8:30am	Current Account	6.8B	8.0B	4.5B 5.6B
		Balance of Payments for 2nd Quarter Provided by: Statistics Canada Official Release: Press Release The current account in Canada widened to C$6.8 billion as higher prices for the country's commodities helped boost exports. "Once again, accelerating energy prices were the main factor behind the strength in the value of sales of goods to other countries. Despite a marginal decline in volumes, export values for crude petroleum were up $3.0 billion on strong price gains (+25%)." Still, the 1st quarter's figure was revised down and forecasts had the second figure coming in at C$8 billion. From the Release: "The current account surplus with the rest of the world (on a seasonally adjusted basis) expanded further to $6.8 billion in the second quarter of 2008, led by exports of goods. These gains were mainly attributable to higher prices for several exported commodities, which pushed the goods surplus to $16.4 billion. Transactions in services and investment income had a dampening effect on the increase in the current account balance in the second quarter. Net transactions in the capital and financial account (unadjusted for seasonal variation) were more subdued than in several previous quarters, with outflows of funds exceeding inflows. There was strong foreign demand for Canadian securities, in particular bonds, while foreign direct investment into Canada slowed significantly. For their part, Canadian investors continued to shy away from foreign debt instruments in favour of equity, while Canadian direct investment and other investment flows moderated." The Canadian Dollar held its ground near 1.0450 during NY trading as the US releases a positive GDP report.
8/29	8:30am	Gross Domestic Product	0.1%	0.2%	-0.1%
		For the Month of June Provided by: Statistics Canada Official Release: Press Release GDP (2Q) q/q : 0.1%, pr. -0.2% (r. -0.1%, 1Q) Annualized GDP q/q: 0.3%, forecast 0.6%, pr. -0.8% (r. -0.3%, 1Q) The Loonie had been gaining on the greenback prior to the NY open, falling below 1.05 to test 1.0470. However, following the GDP release the USD/CAD pair jumped to retest yesterday's high (1.0528). The news of weaker GDP growth was not received well by the markets and in th next several hours the pair rose to test 1.0570. From the Release: "Real gross domestic product (GDP) edged up 0.1% in the second quarter of 2008, following a 0.2% decline (revised from -0.1%) in the first quarter. Real GDP advanced 0.1% in June. While final domestic demand continued to outpace GDP, growing 0.5% in the quarter, foreign demand for Canadian goods and services registered its fourth consecutive quarterly decline. The Canadian economy grew at an annualized rate of 0.3% in the second quarter, compared with 3.3% growth for the US economy. Real gross domestic product increased 0.1% in June, after declining 0.1% in May and growing 0.4% in April. There were increases in construction, wholesale trade, the public sector as well as in transportation services, and declines in natural gas extraction, manufacturing and forestry. The finance and insurance sector and some tourism-related industries were unchanged. The volume of exports of goods and services fell 1.5% in the second quarter, the fourth consecutive decline, leaving their level 4.7% lower than in the second quarter of 2007. The decline in the second quarter of 2008 was widespread, as international sales of forestry products, machinery and equipment, and automotive products continued to fall reflecting, in part, declining US expenditures on these goods. The volume of energy exports decreased 3.7%, following a jump in the first quarter."
8/29	8:30am	Producer Price Index m/m	0.4%	1.0%	1.3%
		Industrial Product Price Index (IPPI) for July Provided by: Statistics Canada Official Release: Press Release PPI y/y: 6.8%, pr. 5.4% (Jun), 2.7% (May), 1.0% (Apr), -0.2% (Mar) RMPI m/m: 1.4%, forecast 0.2%, pr. 4.4% (Jun), 3.1% (May), 5.1% (Apr) From the Release: "The price indexes for manufactured goods and raw materials registered lower monthly growth in July than in the previous four months, increasing 0.4% and 1.4% respectively, primarily as a result of the slowdown in the rise of petroleum prices. From June to July, prices charged by manufacturers, as measured by the Industrial Product Price Index (IPPI), rose 0.4%, down from the average monthly growth rate of 1.5% observed from March to June. The increase in the index in July was almost entirely attributable to a 2.4% rise in the prices for petroleum and coal products, which was the lowest rate in five months. The prices for products other than petroleum and coal grew 0.1%, down from the 0.9% gain in June. Among these other products, 10 major groups out of 20 posted increases, led by meat, fish and dairy products. On the other hand, prices for motor vehicles and other transport equipment declined. On a year-over-year basis, the IPPI rose 6.8%, up from the 5.8% increase posted in June, continuing its growth for a fourth consecutive month. Prices for petroleum and coal products were 52.1% higher compared with July 2007 and were the main contributor to the increase in the IPPI.If petroleum and coal products were excluded, the IPPI would have risen 1.6%, a higher growth rate than the 0.7% recorded in June."
8/29	8:30am	Raw Materials Price Index m/m	1.4%	0.2%	4.4%
		For July Provided by: Statistics Canada Current Release: (HTML) RMPI y/y 28.9%, pr. 32.1% The surging cost of raw materials cooled a bit in July, registering a 1.4% growth, down from June's 4.4%. The deceleration reflected that of mineral fuels costs, which edged down to a pace of 2.2%, the lowest advance in five months. On the year, mineral fuels and vegetable products have been leading the gains, while non-ferrous metals have been slowing the advance. July and August have seen prices stabilize and peak worldwide. With inflation mitigating as many central banks have expected, looser monetary policies will be implemented. Though the RPMI did ease its pace but not by as much as economists had forecasted, at 0.2%. The Industrial Product Price Index, which measures prices charged by manufactueres rose 0.4%. This is a drastic decline from the growth average rate of 1.5% between March and June. The decelerated July increase was entirely due to a slight 2.4% rise in petro and coal products, which is the slowest pace in five months.

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Central Bank Watch - Latest Bank of Canada Decision

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December
9th, 2008

Actual

Forecast

Revised Form

1.50%

1.75%

2.25%

N/A

Provided by: Bank of Canada
Official Statement: Press Release

The Canadian central bank cut its benchmark interest rate by 75 basis points, increasing its pace of cuts. Expectations had been for a 50 basis point cut, though with other central banks around the world accelerating the pace at which they are lowering borrowing costs, there was a good chance that the Canadian central bank would follow suit. The move puts the interest rate at its lowest level since 1958. The move was needed to bolster economic growth as the global recession intensifies. Today's accompanying announcement also said for the first time that the Canadian economy "is now entering a recession." If economic conditions continue to deteriorate, as we saw recently with employment and housing starts figures, the bank seems ready to cut rates again.

From the Release: "The outlook for the world economy has deteriorated significantly and the global recession will be broader and deeper than previously anticipated. Global financial markets remain severely strained. Measures taken by major governments are beginning to encourage credit flows, although it will take some time before conditions in financial markets normalize. In addition, a series of recently announced monetary and fiscal policy actions will also support global economic growth.

While Canada's economy evolved largely as expected during the summer and early autumn, it is now entering a recession as a result of the weakness in global economic activity. The recent declines in terms of trade, real income growth, and confidence are prompting more cautious behaviour by households and businesses.

In light of the weakening outlook for growth and inflation, the Bank of Canada lowered its policy interest rate by a total of 75 basis points in October and by an additional 75 basis points today. These monetary policy actions provide timely and significant support to the Canadian economy."

The Loonie gave up yesterday's gains, with the USD/CAD climbing back to 1.2740 after reaching the 1.25 level yesterday. However that high acted as resistance from which the pair fell back down in favor of the Loonie.

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Central Bank Watch - Bank Officials' Comments

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November 01 (BOC Governor Dodge) -- The Canadian dollar has seen some selling pressures stemming from comments over the weekend by Bank of Canada Governor Dodge. Speaking to reporters at the G-20 meeting of finance ministers and central bankers in South Africa, Dodge said that financial market volatility and downside risks to the world economy have increased since early October, and that this "clearly poses a risk that we are going to have to take into account when setting our own policy.

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Economic and Financial Profile

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Exports Oil and Commodities:

The Canadian Dollar is influenced by prices for oil and other commodities. Canada is the 12th largest exporter of oil in the world (1.1 mil barrels per day), with most of it going to the United States. The country is also the 7th largest producer of oil (3.3 m. b. per day) which it uses domestically. It is also a world leader in the production of gold, nickel, uranium, diamonds, and lead. A strong rise of the price of oil and commodities has helped boost appreciation of the Canadian Dollar, especially in Sept/Oct 2007. This can be seen in longer term too.

Closely Tied To United States:

The Canadian Dollar is strongly impacted by economic conditions in the United States, as the U.S. is Canada's main trading partner in terms of exports (80%) and imports (66%). A downturn in US spending means less activity for certain export industries in Canada. This cross border trade is sensitive to the exchange rates between the US and Canadian Dollars, as a stronger Canadian Dollar will make Canadian exports more expensive, and US imports cheaper for Canadian consumers.

Financial institutions in Canada are also tied to activities on Wall Street, and the performance of certain US sectors, especially banking and finance. This has been seen recently as sub-prime mortgage woes have manifest themselves on Canadian banks balance sheets and lowered the Canadian stock markets.

Appreciation vs the Dollar:

The Loonie, a nickname for the Canadian Dollar, hit a record low versus the Dollar in 2002. At that time 1 US Dollar was worth C$1.58. The last 5 years have changed thing dramatically as the currencies hit parity in September 2007, and in November '07, the exchange rate stood at 1 US dollar = C$.905. The Loonie had appreciated 42% in that span gains accelerating during 2007. This strong appreciation was a result of American currency and economic weakness and high prices for Canadian exports such as oil, gas, and metals.

This figure is a monthly chart, of the USD/CAD pair. Prices moving upward favor the strength of the US Dollar (the top currency in the USD/CAD quote). When prices move down they favor the Canadian Dollar (the bottom currency in the pair).