Canadian economy is headed for a slower end of the quarter

The Canadian economy is headed for a slower end of the quarter, as indicated by disappointing July wholesale trade and retail sales. The mixed signals regarding the resilience of the Canadian consumer put into doubt how supportive consumption might be during the coming months in mitigating the economic slowdown. In the current environment of slower-than-expected Chinese growth and falling demand and prices for export commodities, additional downside risks is expected in the growth outlook, as China is Canada's second-largest export partner, while capital expenditure in the energy sector and investment falter. As such, it is believed that additional monetary policy easing will be needed, which so far has not been priced-in by the market. 

"We remain bearish on the loonie and have revised up our end-2015 forecast to 1.35 from 1.29 in our latest FX Quarterly, and to 1.41 in a one-year time horizon", notes Barclays.

 In this context, the release of July's monthly GDP on Wednesday (consensus 0.2%) will shed light on the likely depth and length of the current slowdown. On Thursday, we receive more up-to-date data, as September's RBC Manufacturing PMI is released.