Canada’s economy set to shrink for another month?


At this point, it should be no big surprise that the US economy has not performed quite impressively in the year so far. The GDP report released yesterday showed a growth of 0.2% in economic activities. Falling below forecast of 1.0%. The economy came to a near halt as the results reflected bad weather condition, fall in consumer spending, cuts in business investment and so on. So far during the recovery years, the economy has been seen to have a slow start to the year, and this year is no different. The results caused the USD to fall across board. Stocks fell as well, with the S&P loosing over 0.4% by New-york market close.

The policy makers applied a hawkish tone according to the FOMC statement, again reiterating that the factors which have led to a slow down in economic activity are likely temporary. This will fade out and “moderate growth” is expected through the year. Focus still remains on the labor market conditions other key economic data to determine when rates will be raised.

The New Zealand policy makers held the official cash rate at 3.50% as widely expected. RBNZ Gov. Stephens said the option is open to reduce the OCR rate  if demand weakens, and wage and price-setting outcomes settle at levels lower than is consistent with the inflation target. They also grumbled about the high exchange rate, saying “The appreciation in the exchange rate, while our key export prices have been falling, is unwelcome,” The NZD fell after the report.

According to Japan’s Monetary Policy Statement, policy makers chose to keep maintains stimulus at a consistent rate of expanding the monetary base at an 80 trillion yen ($672 billion) annual pace as widely expected. Even with deflation threatening after inflation came to an halt, policy makers are confident that the economy will bounce back after the fall in oil prices fades. Further insights into the mindset of the Central bank is expected later today during the BOJ Press Conference.

From the US, we have unemployment claims to be released by 12:30pm GMT. The last two weeks has been negative with results coming close to 300k. This may be further evidence of a weak labor market.

Canada’s GDP is also scheduled for release by 12:30 PM GMT. It is forecast for another month of economic shrinking at -0.1%. The ripple effect from the fall in energy prices has been attributed as the prime factor for the recent weakness in the country’s economic activities. This leaves us wondering if Canada’s economy set to shrink for another month? Later in the day, BOC Gov Stephen Poloz is due to testify, along with Senior Deputy Governor Carolyn Wilkins, before the Senate Finance Committee, in Ottawa. Further clues on prospective monetary policy is expected.

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