12 Jan 2016
Canada: Oil playing a role in broad deterioration in sentiment - Wells Fargo
FXStreet (Córdoba) - According to Tim Quinlan, Economist at Wells Fargo, the Canadian economy is more than crude oil, but the decline in the price of the barrel plays a key role in sentiment.
Key Quotes:
“There was a period this autumn when oil prices were beginning to stabilize at a less-depressed level. For the three-month period of September through November, the price of a barrel of WTI oil averaged $44.95. On that basis, prospects for the Canadian economy were brighter than they are today, with oil prices this week trading in the low $30s—prices last seen in 2004.”
“While Canada’s economy has a lot more going on than just oil, this key vulnerability is looking worse by the day and it is playing a role in the broad deterioration in sentiment. One measure of Canadian consumer confidence has fallen in tandem with oil, posting seven-straight weekly declines.”
“The second quarter ended with a thud in Canada as GDP showed a 0.5 percent monthly drop in September. October’s GDP report showed essentially no change for the first month of the fourth quarter. By our reckoning, it would take monthly growth of 0.3 percent in both of the remaining months of the year for Canadian GDP to grow in the fourth quarter. Considering the average in the first 10 months of the year was 0.0 percent; that is a heroic assumption.”
“Not all the news in Canada is negative. This week also brought news that the trade deficit narrowed more than expected. Increasing demand from the United States should continue to underpin Canadian exports in the months and quarters ahead.”
Key Quotes:
“There was a period this autumn when oil prices were beginning to stabilize at a less-depressed level. For the three-month period of September through November, the price of a barrel of WTI oil averaged $44.95. On that basis, prospects for the Canadian economy were brighter than they are today, with oil prices this week trading in the low $30s—prices last seen in 2004.”
“While Canada’s economy has a lot more going on than just oil, this key vulnerability is looking worse by the day and it is playing a role in the broad deterioration in sentiment. One measure of Canadian consumer confidence has fallen in tandem with oil, posting seven-straight weekly declines.”
“The second quarter ended with a thud in Canada as GDP showed a 0.5 percent monthly drop in September. October’s GDP report showed essentially no change for the first month of the fourth quarter. By our reckoning, it would take monthly growth of 0.3 percent in both of the remaining months of the year for Canadian GDP to grow in the fourth quarter. Considering the average in the first 10 months of the year was 0.0 percent; that is a heroic assumption.”
“Not all the news in Canada is negative. This week also brought news that the trade deficit narrowed more than expected. Increasing demand from the United States should continue to underpin Canadian exports in the months and quarters ahead.”