Canada: Setting up for real GDP (April) – TDS

Research Team at TDS, suggests that Canada’s industry-level real GDP is forecast to have increased by 0.1% on a monthly basis in April.

Key Quotes

“The details of the report will likely show a bounce in manufacturing output and continued momentum in real estate activity. A more muted performance is expected from wholesale and retail sales, which lines up with the activity data released earlier this month. The wildcard in the report will be the energy sector, which took a large bite out of GDP in March. On this front, both energy export and import volumes fell while rig count data showed an additional decline through April. There were also reports of maintenance-related shutdowns that could weigh on output and related activity.

This print will give a very early indication of what promises to be a very challenging Q2 for the Canadian economy. Already hampered by a poor handoff from Q1—though March could be revised higher when measured to two decimal places—the April data is expected to provide only a partial offset ahead of the disruption caused by the wildfires in Northern Alberta. Collectively these factors will leave annualized growth contracting by between 0.8% and 1.0%. While a recovery is expected over the second half of the year, the magnitude will be determined by developments in the global economy.

Foreign Exchange

USD/CAD continues to range trade in the wake of the Brexit vote. Notably, USD/CAD has chopped around in a very tight range this week which comes on the heels of the 3 cent swing last week. Looking ahead, we suspect local data will likely take a back seat to the fallout from the Brexit vote, suggesting risk appetite will remain the key driver. With Brexit a slow-burn story, we think the immediate outlook indicates lower macro volatility into the long weekend but still prefer to fade the knee-jerk pop in risk given the political uncertainty looming over markets. The knock to European growth could also dent demand for oil prices, so we prefer buying USD/CAD dips below 1.30. Immediate support is seen near 1.2920.”