Coming up at 1230GMT, economic growth data from Canada
BMO:
- growth stumbling in 2018Q4 and likely faring no better to start 2019.
- A weak handoff, some bad weather, and an absolutely horrendous performance for net exports likely drove the softness in Q1 GDP. The latter is the key cog in our forecast for a mere 0.5% annualized rate in the quarter, with trade expected to subtract about 3.5 ppts from the headline.
- the uncertainty surrounding global trade-U.S./China, USMCA, until recently the steel/aluminum tariffs-has been a consistent weight on business investment, and Q1 was no different.
- Government spending is expected to rebound after capital spending fell heavily in Q4. Inventories will likely add strongly to growth as well, and are partially the result of the surge in imports.
- Before getting too downbeat on the economy, we're forecasting a solid rebound in Q2, and the early April returns are pointing in that direction.
Via TD:
- We look for another soft quarter for economic activity with growth of just 0.4% (q/q, annualized) in Q1. Beneath the repeat headline number should be better details.
- Imports and other data suggest a rebound of business investment at the start of the year (+7.7%) and a healthy labour market likely underpinned a moderate pickup in household spending (+2.1%), notably on services.
- Conversely, recently revised construction data and soft resale activity point to little growth in residential investment (+1.5%).
- The key headwind to GDP growth in Q1 will be the sizeable drop in exports (-5.6%), where the quarterly performance was disappointing across most product categories.
- Offsetting this is an expected jump in business inventories (adding 1.5 p.p. to headline growth) as levels in the energy sector remained elevated post-curtailment and stockpiles elsewhere continued to build.
- The 0.3% print will provide a solid handoff to Q2 where the Bank of Canada has set the bar low with projections for 1.3%.
- A disappointing headline might generate a knee-jerk pop in USDCAD, though, under the hood, the details should be more relevant. We also suspect that the near-term direction of risk sentiment will offer the more powerful signal
