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Analysts (Mostly) Still Looking For June Cut After GDP [2/2]

CANADA
  • National: “GDP per capita has fallen sharply since monetary tightening began, by 3.2% - a decline of a magnitude only seen in recession (right chart). What lies ahead is unlikely to be more enviable, as we estimate that 30% of the impact of previous rate hikes on consumption remains to be seen, given the lag in monetary policy transmission. In light of this morning's report, we continue to see a buildup of excess supply in the economy over the coming months, with a larger negative output gap. Under these circumstances, we still expect monetary easing to start in June.”
  • RBC: Q4 GDP growth couldn’t prevent “a 6th consecutive decline in output on a per capita basis. Details were on the soft side, with output propped up by stronger external demand as exports rose while domestic demand, particularly business spending, continued to soften. The bottom still isn't falling out of the economy in a way that would push the BoC to shift quickly to looser monetary policy. Our base-case assumption is that the BoC will shift to interest rate cuts in June.”
  • TD: “While today's report came in better than consensus and much better than what the BoC was thinking, the narrative on the Canadian economy remains the same. […] Stripping out international drivers, the economy contracted, while GDP per capita has now declined in five of the last six quarters. The BoC has recognized this weakness in recent commentaries, but it is patiently waiting for inflation to follow suit. We think the wheels are in motion for this to come through the data in the coming months and have penciled in the first BoC rate cut for June.”
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