Posthaste: Why the Bank of Canada might not hike as high as many fear
But Capital argues that there are several reasons why the Bank might not hike as much as many now suppose.
First, a cloudy outlook for manufacturing. Though manufacturing sales increased 0.5 per cent in June and 0.6 per cent in July, these gains only partially offset a 2.1 per cent decline in May.
July gains also appear to have been boosted by a temporary spike in motor vehicles and parts sales, due to fewer retooling shutdowns. U.S. data showed a similar surge, but was then revised down and in August output fell by 1.4 per cent “suggesting that the Canadian surge will also prove to be fleeting,” said Ashworth.
“With the manufacturing PMI dropping sharply over the past couple of months, it appears that the global manufacturing malaise – caused by zero-covid lockdowns in China and soaring energy prices in Europe – will infect Canada too,” he said.