Thoughts

March 24, 2023 | 14:40

What to Watch to Assess the Impact on Canada

Economist

Managing Director, Canadian Rates & Macro Strategist
Fixed Income Strategy

Benjamin has been with the Bank of Montreal for over a decade. He is responsible for the Canadian macro-economic... (Read more)

Benjamin Reitzes

Managing Director, Canadian Rates & Macro Strategist
Fixed Income Strategy

Benjamin has been with the Bank of Montreal for over a decade. He is responsible for the Canadian macro-economic... (Read more)

The Canadian economy entered this period of global banking stress with strong momentum. We’ll get a check-in with January GDP next week, but it looks like growth was solid to start 2023 (though February appears to have slowed meaningfully). Doug Porter and Sal Guatieri highlight the potential impact on Canada from the banking stress in this week’s Feature. Here are a few data points we’ll be watching to assess the potential impact. This is a time when the lagged release timing of Canadian data can be particularly challenging, but there are some less-followed numbers worth keeping an eye on

The timeliest figures come out of the U.S. weekly banking figures. Watch loan and deposit growth, as a big pullback in either would be a red flag for activity south of the border and would not bode well for Canadian exports.
Activity generally takes time to be impacted by U.S. events and tightening credit. Accordingly, look for the monthly credit numbers. They aren’t any timelier than the activity figures, but if the banking sector tightens credit standards sharply, it should show up there quickly.
The Bank of Canada’s Business Outlook Survey could prove useful. The Survey will be out on April 3, and has the potential to provide any early warning signs. The BoC has tended to add questions on whatever topic is trending, and this would be a good opportunity to see if there’s been any impact from the stress.
Insolvency statistics are out relatively early (February was out on Thursday) and could signal brewing issues on the consumer or business side.

Additionally, the normal slate of data will be followed, though it will take some time before we can assess if there’s any impact from the banking stress. Meantime, monetary policymakers will engage businesses across the country for updates.

Key Takeaway: We’re going to be watching the data closely for any signs that the banking stress is impacting the macro backdrop in Canada. The Bank of Canada will be doing the same, which suggests it will keep policy rates comfortably on hold through at least April assuming a deeper crisis is avoided.