Sunday, October 4, 2009

The recovery is not off to a good start

A few weeks ago Canadian forecasters convinced themselves that growth in the 3rd Quarter was going to be much better than expected. Unfortunately, the data doesn't seem to be cooperating. Retail Sales for July actually fell 0.6%, and real GDP growth in July was flat, with the retail and construction industries posting declines. This may be a concern given that personal consumption expenditures and residential construction tend to be early indicators of recovery - as shown in this chart from Calculated Risk:

We should get a better idea of the shape of the recovery this week with data for Q3 housing starts, building permits, jobs, and the increasingly important BoC Senior Loan offers Survey all being released in the next few days.

My own forecast for Q3 growth is still somewhere around 1-1.5%. Consensus from Bay Street seems to be around 2-2.5%, though I notice that BMO has, again (aside: I think BMO revises every week, it's really something) revised their forecast to 1.3%.

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