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Canada: International Economic Week In Review

2017/06/09

The Bank of Canada maintained their current .5% interest rate policy this week, offering the following assessment of the Canadian economy:

The Canadian economy's adjustment to lower oil prices is largely complete and recent economic data have been encouraging, including indicators of business investment. Consumer spending and the housing sector continue to be robust on the back of an improving labour market, and these are becoming more broadly based across regions. Macroprudential and other policy measures, while contributing to more sustainable debt profiles, have yet to have a substantial cooling effect on housing markets. Meanwhile, export growth remains subdued, as anticipated in the April MPR, in the face of ongoing competitiveness challenges. The Bank's monitoring of the economic data suggests that very strong growth in the first quarter will be followed by some moderation in the second quarter.

OPEC's decision to increase oil production had a strong negative impact on western Canada, which had seen a boom of tar sands related activity. But according to the central bank, the adjustment is now over. They also describe a standard series of economic cause and effect events, starting with a declining unemployment rate:

The jobless rate dropped from 7.3% at the beginning of 2016 to its current level of 6.5%. This has increased consumer confidence, which translates into higher consumer spending:

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