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24 Dec 2014
Robust Canadian growth won’t last – Nomura
FXStreet (Barcelona) - According to Charles St-Arnaud, Research Analyst at Nomura, Canadian growth remains robust thanks to education and oil sectors, but both should slow down, further anticipating next year’s growth to be soft with chances of CAD depreciating to USD 1.25 levels by mid-2015.
Key Quotes
“Monthly GDP increased 0.3% in October, stronger than expectations, and follows an increase of 0.4% m-o-m in September.”
“The service sector increased 0.3% m-o-m, supported by the education sector (+2.6% m-o-m), which matched the GDP monthly increase.”
“Overall, the report is neutral. While growth was stronger than expected and likely to lead to stronger than expected growth in Q4, currently around 2.4% q-o-q ar., momentum is weak.”
“The increase in the education sector will be temporary, while growth in the rest of the service sector was weak. The increase in the manufacturing sector was at odds with the decline in manufacturing sales, suggesting an increase in inventory and weaker production in coming months.”
“Moreover, as we have shown in Canada Special Report - Oil prices, investment and growth, with oil prices stabilizing below $60 a barrel, growth could be lower by about 0.5pp next year.”
“With growth next year unlikely to be strong enough to meaningfully shrink the output gap as a result of lower oil prices, we believe the Bank of Canada (BoC) is likely to take a dovish stance in January and lower its growth forecast for 2015.”
“We believe CAD will continue to depreciate next year and USD/CAD could reach 1.25 by mid-year. This reflects the weaker growth outlook, a dovish BoC, while the Fed remains committed to liftoff, and the need for further adjustment to lower the Canadian terms of trade.”
Key Quotes
“Monthly GDP increased 0.3% in October, stronger than expectations, and follows an increase of 0.4% m-o-m in September.”
“The service sector increased 0.3% m-o-m, supported by the education sector (+2.6% m-o-m), which matched the GDP monthly increase.”
“Overall, the report is neutral. While growth was stronger than expected and likely to lead to stronger than expected growth in Q4, currently around 2.4% q-o-q ar., momentum is weak.”
“The increase in the education sector will be temporary, while growth in the rest of the service sector was weak. The increase in the manufacturing sector was at odds with the decline in manufacturing sales, suggesting an increase in inventory and weaker production in coming months.”
“Moreover, as we have shown in Canada Special Report - Oil prices, investment and growth, with oil prices stabilizing below $60 a barrel, growth could be lower by about 0.5pp next year.”
“With growth next year unlikely to be strong enough to meaningfully shrink the output gap as a result of lower oil prices, we believe the Bank of Canada (BoC) is likely to take a dovish stance in January and lower its growth forecast for 2015.”
“We believe CAD will continue to depreciate next year and USD/CAD could reach 1.25 by mid-year. This reflects the weaker growth outlook, a dovish BoC, while the Fed remains committed to liftoff, and the need for further adjustment to lower the Canadian terms of trade.”