2021Gamble wrote: BMO on The Day Ahead in Canada
07:25 AM EST, 02/28/2023 (MT Newswires) -- Bank of Montreal (BMO) said that investors will see how the Canadian economy fared in Q4 and December at 8:30 a.m. ET Tuesday, along with a preview of January's result.
Canada's economy has held up surprisingly well in the face of the most aggressive rate hike campaign in a generation. The bank is expecting real gross domestic product (GDP) growth to clock in at 1.5% in Q4, in line with Statistics Canada's flash estimate.
Consumption looks to add to growth in Q4 after being a drag in Q3. Business investment was likely mixed, with falling machinery/electrical import volumes pointing to another drop in machinery and equipment spending, while non-residential construction is expected to see a decent gain. The latter contrasts with the residential sector which looks to see a third consecutive steep quarterly contraction. Following back-to-back large inventory builds, BMO saw a smaller increase will be a drag on growth. However, net exports should provide an offset as export volumes contracted less than imports in the quarter.
For December GDP, the bank is looking for a flat reading, in line with the flash estimate, with a decent chance of a +0.1% m/m print. Services drove growth in the prior two months, and that was likely the case once again, with retail and home sales firming. Wholesale and manufacturing activity fell according to earlier data, while StatsCan flagged a pullback in mining/oil/gas. Despite a big employment gain, hours worked dipped in December, suggesting broader activity likely struggled.
Looking ahead to January, hours worked surged, retail activity looks to have turned higher and wholesale trade rebounded, pointing to a decent start to the year for monthly GDP, stated BMO.
Investors will also get the 2023 capital expenditures survey from StatsCan Tuesday.
The provincial Budget season begins Tuesday with British Columba (BC) and Alberta tabling their FY23/24 documents. The excitement is real. BC has been handily topping fiscal expectations and is currently on track for a C$5.7 billion (1.3% of GDP) surplus for FY22/23. That would be two positive balances in a row.
That said, the current provincial government seems keen to keep spending and it sounds like it is going to do so right back into deficit.
Meantime, the province of Alberta is sitting on a hefty surplus (C$12.3 billion or 2.6% at last check for FY22/23), and this pre-election document has plenty of room to dole out new measures. Alberta recently received a credit rating upgrade, and once again boasts the strongest budget balance and debt metrics among the 10 provinces. Oil prices are also trading close to levels assumed at the time of the mid-year fiscal update -- that update saw the surplus shrinking to C$5.6 billion for FY23/24 alongside $78.50/barrel WTI.
The Canadian dollar (CAD or loonie) is steady at $1.357/USD (73.7 US cents) early Tuesday, added BMO.