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Canada Wholesale Sales Sharply Higher

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Canada Wholesale Sales Sharply Higher

Canada recorded higher Wholesale Sales figures during the month of February according to a release just published by Statistics Canada. The Month on month number has come in at 1.1% against a January reading of 0.8%. A print of just 0.7% had been expected.

The Bank of Canada (BoC) last week left the economy’s benchmark overnight rate stable at 1% following it’s regular monetary policy meeting. There is a noticeable shift in outlook from the BoC regarding the timing of the country’s growth pick up. Growth is still being forecast by the Bank but in a statement following last weeks meeting the Governor, Stephen Poloz, slightly pared back the Bank’s predictions for economic expansion and more importantly noted that the Monetary Policy Committee would be keeping an ‘open mind’ on the potential for further monetary easing. Until now Canada’s rapid return to economic growth had only fuelled speculation of monetary policy tightening over the coming months.

Canadian authorities are beginning to fret over the weakness in the country’s currency. Less so the low value of the Canadian Dollar as this is helping exports but more the root cause of this low value. The Canadian currency has fallen almost 10% against the US Dollar over the course of the last year, this is being attributed to the CAD having served as a safe haven during the economic crises due to the underlying commodity based economy. The unwinding of the safe haven position over the past year as other developed economies recover is the culprit for the Loonie sell off.

The commodity rally too is largely coming to an end, and just like the Canadian Dollar the Canadian economy has benefited from this extended rally over the past few years. As this rally falls away fundamental weaknesses are being exposed in the Canadian economy, particularly in the manufacturing sector which had been starved of investment during the commodity boom, this is now running at 12% of Canada’s GDP down from 16% over the course of the last ten years. This is likely contributing to the Bank of Canada’s unease and evident reversal of stance in the face of apparent strong growth.

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