BoC unlikely to move away from its neutral approach despite weak data

Statistics Canada's latest figures released last Friday showed Canada's deficit spiked to a record level of $3.6 billion in June. Statistics Canada said exports fell 4.7 percent in the second quarter to $124 billion, the steepest slide since the second quarter of 2009 during the Great Recession. Canada's quarterly trade deficit expanded to a record $10.7 billion in the second quarter, up from $6.4 billion in the first quarter.

On employment, Statistics Canada's labour force survey said the market lost 31,200 net jobs in July. The national unemployment rate inched up to 6.9 percent in July from 6.8 percent in June. The country shed 71,400 net full-time jobs in July which was partly offset by an increase of 40,200 in less desirable, part-time positions.

“The annual trend in employment and hours worked is commensurate with an economy that continues to face headwinds,” said Nick Exarhos, an economist with CIBC World Markets.

That said, the Bank of Canada (BoC) focuses mainly on inflation and inflation is within its target range. Moreover the BoC lowered its growth outlook for 2016 in its last monetary policy report, but still expects to see decent growth over the coming years. Hence it is unlikely that the BoC will move away from its neutral approach for now.