The Canadian economy appears to be cooling off based on the latest reading from BMO’s Canadian Business Activity Index (BAI).
Antoni Shkraba
A report released Monday said the BAI fell 0.1 per cent in February after jumping 0.5 per cent last month amid unseasonably warm weather.
“Behind the slowdown is a coordinated drop in wholesale trade, retail volumes, and manufacturing sales. The first two are likely feeling the inflation music as consumer resistance to higher prices continues to gain steam. The latter is buckling under the weight of aggressive rate hikes and elevated inventories dampening new orders. Interest rates are also curbing activity in residential construction with housing starts recording four-straight months of decline before rising in February,” said BMO.
“Despite the broad slide in business sales, there were still pockets of resilience in the economy in February. With potential homebuyers anticipating the end of the BoC’s (Bank of Canada) hiking cycle and home prices down nearly 16 per cent from their February 2022 peak, there were clearly some perceived buying opportunities as existing home sales climbed 2.3 per cent. The recent rally in the GOC (Government of Canada) five-year yield (now below three per cent) could provide further support in March. The job market also continued to sizzle with hours rising 0.6 per cent, while the jobless rate stayed flat at historically low levels. Small business confidence also ticked up slightly.
“The Canadian economy is showing signs of cooling and all of this was before troubles emerged in the global financial system. While we expect modest growth in Q1, the recent banking stress flags tighter credit ahead, which will compound the effects of higher rates and sticky inflation, and all pointing toward a mild downturn around mid-year.”
(Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He worked for 35 years at the Calgary Herald, covering sports, crime, politics, health, faith, city and breaking news, and business. He works as well as a freelance writer for several national publications and as a consultant in communications and media relations/training. Mario was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list)
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