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Here’s how fast Canada’s economy is now growing

Here are six animated graphs that show Canada’s economic turnaround in action—and one that shows what’s still missing


 

If the majority of private sector economists are correct, the Bank of Canada will raise interest rates on July 12 for the first time in nearly seven years. Despite the Bank’s assertion as recently as January that another rate cut was “still on the table,” top officials have growing more bullish about the economy. Here’s a look at several key measures that show just how fast Canada’s economy has turned around over the past six or so months—and the one key measure that’s lagging

READ MORE: What higher interest rates would mean for real estate, debt and the economy

Employment growth

Friday’s jobs report delivered the latest boost to those expecting a rate hike on July 12. In June the economy added roughly 45,000 net new jobs, which was the fastest pace of annual employment growth since early 2013. It wasn’t all good news—the tighter job market hasn’t translated into much bigger paycheques, with average weekly wages rising at just 1.1 per cent from the year before, meaning that after inflation Canadians took a slight pay cut. Still, there’s no denying the strong rebound in job growth.
Bank of Canada-jobs

Hiring intentions

The boom in employment could keep on going, too, if the Bank of Canada’s business outlook survey is any indication. The latest quarterly survey, released on June 30, showed businesses were the more intent on hiring new employees than they’ve been in more than a decade. (The Bank’s gauge of hiring intentions shows the balance of businesses expecting to add new employees minus those that think their employment levels will be lower.)

Bank of Canada-hiring

RELATED: Business investment hasn’t been this crummy in 40 years

Business expectations for future sales

Another key measure from the Bank of Canada’s outlook survey is the optimism businesses suddenly have about future sales of their goods and services. The Bank’s indicator of future sales gauge hasn’t been at this level since 2012.

Bank of Canada-future sales

Canadian exports

One factor driving business optimism is the increase in demand abroad for Canadian-made goods. Canada’s weak export picture had been a constant source of concern for Stephen Poloz in recent years (reminder: before he was the Governor, Poloz was the head of Export Development Canada). As recently as January the Bank expressed concern about “choppy” exports and Donald Trump’s protectionist tendencies. With exports now growing at their fastest pace since 2011, that should check off an important box for Poloz in deciding whether to increase interest rates.

Bank of Canada-exports

RELATED: 5 depressing facts about Canada’s exports

Retail sales

Retailers are also enjoying the best run they’ve had in years, despite the high-profile woes of big chains like Sears (which is in bankruptcy protection) and HBC, which is slashing jobs to cut costs. Flush with cash withdrawn from the equity in their homes and other borrowed money, Canadian consumers have gone on a spending spree with gains spread across a wide variety of retail sectors, including vehicles, building materials, home furnishings, clothing and food.

Bank of Canada-retail

Gross Domestic Product

All of this is feeding into the strongest economic growth Canada has seen since the collapse of oil prices in 2014.

Bank of Canada-GDP

RELATED: Econo-metrics: The (almost) monster first quarter GDP

Inflation

So, we have booming job market, rising optimism in businesses, soaring exports and consumer frenzy—a rate hike on July 12 must be a slam dunk, right?

Not so fast. One key ingredient is missing, and it’s the most important piece of the puzzle as far as the Bank of Canada’s mandate is concerned: inflation. Inflation has tumbled below the Bank’s two per cent target, and this doesn’t include the full effect of the latest decline in oil. The question is, will this be enough to dissuade Poloz from tightening.

Bank of Canada-CPI

RELATED: What weak inflation means for Canadian consumers

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