One economist says Canada’s economic data is moving in line with expectations following the release of the Bank of Canada’s business outlook survey.
The central bank released the business outlook survey on Monday showing that business and consumer expectations for inflation are subdued. David Doyle, managing director and head of economics at Macquarie Group, said the recent survey results align with “what the Bank of Canada is looking for in order to proceed with interest rate cuts.”
“By in large, all of the data or most of the data that is included in that report could be used by Bank of Canada later this month in order to cut rates by a further 25 basis points,” Doyle told BNN Bloomberg during an interview on Monday.
“I think the survey reflects most of May in terms of when the results were gathered and presented so they wouldn’t yet reflect the impact from the rate cut that occurred in early June,” Doyle explained. “By in large, it’s moving in the direction that we would expect, given the slow growth, given the rise in the unemployment rate.”
The recent data, which points to slowing growth in firms’ input and selling prices amid a weaker economic backdrop can be correlated with unions and public sector workers, Doyle said.
“More broadly, when you look at wage growth, I think a lot of the recent increase has come from unionized workers and from public sector workers. That could explain some of the discrepancies we’ve seen between these survey results and the actual wage statement that comes out every month.”
He noted that a significant development in data released over recent months has been the rise of the unemployment rate, which now sits at 6.4 per cent.
“That suggests that the output gap has widened. That widening output gap is leading to reduced inflationary pressures. Exactly what the (BoC) is looking for,” Doyle said.
