Canada Economy Showing Signs of Strength

The Bank of Canada is encouraged by a broadening of economic strength, which includes gains across 70% of industries, a top official said, in what was widely seen as a “hawkish” speech from the country’s central bank.

Senior deputy governor Carolyn Wilkins said the gains are something Canada hasn’t seen since before the oil-price collapse nearly three years ago. Analysts said these and other comments suggest the central bank is beginning to assess when, not if, the bank might introduce its first rate increase in nearly seven years, rdnewsnow reported.

For nearly two years, the rate has been locked at the very low level of 0.5% as a way to help lift the economy. “As growth continues and, ideally, broadens further, (the bank’s) governing council will be assessing whether all the considerable monetary policy stimulus presently in place is still required,” Wilkins said in a speech delivered at the Asper School of Business in Winnipeg.

But despite the bank’s brightening outlook, Wilkins underscored several lingering uncertainties that suggest it won’t be ready to raise its benchmark as early as its next scheduled announcement July 12.

She pointed to unknowns surrounding US economic policy and Canada’s recent below-target inflation readings, as well as employment weaknesses in wage growth and the number of hours worked.

Experts noted Monday how the speech was filled with optimism about the economy’s trajectory. “The hawkish nature of the speech is the first acknowledgment from the bank that the next move is likely to be a hike,” Canadian Imperial Bank of Commerce’s Royce Mendes wrote in a research note to clients.

Looking at the positives, Wilkins credited strength in consumer spending, the services sector and the housing markets for helping carry Canada over the last few years. She said Canada is now seeing an expansion of business investment, particularly in the energy sector, and “broadening” economic activity across the provinces as reasons for optimism.

The economy’s strength also comes from a number of sources, she added. “What’s encouraging is that this growth is not being driven by just a few key industries,” Wilkins said. “More than 70% of industries have been expanding—and that’s a rate we haven’t seen since the oil-price shock. It’s the kind of diversity that helps support strong and sustained overall growth.”