“The spillover is a shock to Canada I think it highlights the importance of the sector”, said Craig Wright, the chief economist for the Royal Bank of Canada.
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Statistics Canada also reported Friday that the annual pace of inflation climbed to 1.7 per cent in April compared with 1.3 per cent in March.
The housing market remains a source of strength and risk after years of sales fueled by low mortgage rates have brought record home prices and consumer debt. USA crude CLc1 prices were up 1.25 percent at $49.23 a barrel. But since the start of this month it started to ease again and was quoted at 1.308 to the USA dollar today, up 5.9 percent this year.
Accordingly, the Canadian dollar, which was on a tear from late January to mid-April, has since cooled off. At roughly US$0.76, it is where the BoC assumed it would be in its April MPR.
TORONTO (AP) Canada’s central bank said Wednesday the Canadian economy will shrink in the second quarter because of Alberta’s devastating wildfires, which shut down its oil sands production.
The global economy is evolving largely as the Bank projected in its April Monetary Policy Report (MPR). Financial conditions remain accommodative, with ongoing geopolitical factors contributing to fragile market sentiment.
“In the past Canadians may thought high oil prices were good for Alberta and maybe we didn’t collectively appreciate that it is also good for Canada”, Wright said. Growth in the first quarter of 2016 appears to be in line with the Bank’s April projection, although business investment and intentions remain disappointing.
The Bank of Canada kept its key lending rate on hold Wednesday, acknowledging the economic adjustment to the oil-price collapse “is proving to be uneven” and output will be further hampered in the first half of 2016 by the Alberta wildfires.
Inflation is roughly in line with the Bank’s expectations. Core inflation, which excludes some of the most volatile items, for the month was 2.2 per cent, up from 2.1 per cent in March.
Canada’s housing market continues to display strong regional divergences, reinforced by the complex adjustment underway in the economy.
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“Bottom line, we expect the BoC to support but not necessarily accelerate the move higher in USD/CAD we have seen in recent weeks”.
