OTTAWA — The Bank of Canada has been in “an enviable position” lately among its U.S. monetary peers, sitting somewhat comfortably in neutral mode as mostly positive economic numbers flow in.
Expect that pattern to be repeated in “a steady stream of economic reports this week, with two decidedly top-tier releases,” according to RBC Dominion Securities.
Trade figures for March will be released on Wednesday, with April job numbers coming out Friday — and both are likely to show small gains.
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“The Bank of Canada is in an enviable position amidst the recent string of better monthly indicators — helped in no small part by the recovery in oil prices of late … and (it) has seen no need to guide markets in terms of policy expectations,” RBC said in its weekly outlook for investors.
Governor Stephen Poloz and his policy council have held their key lending level at 0.5 per cent since July of last year, after two rate cuts in the wake of the oil-price collapse. The U.S. Federal Reserve began raising its borrowing costs in December, to a range of 0.25 to 0.5 per cent following seven years at near zero — but now appears to be slowing its planned pace of hikes.
And while Canadian factories benefitted from a weak dollar, U.S. manufacturers have come under pressure due to their strong currency.
On Monday, the closely-watched ISM manufacturing index in the U.S. showed factory activity increased in April — but at a slower pace, as both new orders and production declined.
“There are still signs that the (U.S.) manufacturing sector is struggling,” said Emanuella Enenajor, senior economist at Bank of America/Merrill Lynch in New York.
“To see softness in a number of sectors — including the consumer, including business capital equipment demand — it’s a sign that the economy is still facing some headwind.”
In this country, factory output also grew during in April, but with the speed of new orders and employment accelerating. RBC said its Purchasing Managers’ Index, released Monday, reading grew in April at “the fastest pace since December 2014 that coincided with the initial downturn in crude oil prices.”
The slowdown is reflected in the overall U.S. economy, which edged up by an annualized rate of 0.5 per cent in the first quarter of this year. That followed fourth-quarter growth of 1.4 per cent.
“To see softness in a number of sectors — including the consumer, including business capital equipment demand — it’s a sign that the (U.S.) economy is still facing some headwind,” Enenajor said.
In Canada, gross domestic product is forecast to expand by about three per cent in the first three months of 2016, compared to less than one-per-cent growth in the final quarter of 2015.
On Friday, Statistics Canada will release employment data for April — with the consensus of analysts pointing to a gain of about 5,000 jobs, following “an astonishing” 40,600 positions being created the previous month, said economist Benjamin Reitzes, at BMO Capital Markets.
The April unemployment rate will likely remain around the 7.2-per-cent level, according to many analysts.
U.S. employment figures will also come on Friday, with non-farm payrolls expected to indicate a slight decline in job creation, to 200,000 positions from 215,000 in March. The jobless rate, however, could slip to 4.9 per cent from five per cent.