Dec. 2019 and the BOC’s latest

The Bank of Canada’s recent decision to hold rates steady leads some to believe the economy is holding strong amidst global uncertainty.  This may certainly be true to an extent, but i think the pressure is mounting and the current environment is about to encounter some turbulence.  Stephen Poloz (Governor of the Bank of Canada) sighted weakening recession concerns and stronger than expected financial market sentiment. Economic growth did slow in the third quarter, the strengths were found in robust housing investment, consumer spending, and business investment. Although the business investment came as a bit of a surprise. Just as last meeting the BOC will wait  to see how global conflicts will effect the Canadian economy before making a decision to move interest rates. 

None of the above leads me to believe the economy is doing anything more than treading water.  November saw significant job losses across the board to both full and part time jobs, and saw unemployment rise to 5.9%. Further to that a good chunk of those jobs were in the manufacturing sector.  In my opinion looking at the numbers and listening to the words of the BOC.  The economy is being held up yet again by the housing market and consumer spending.  Both of those things the government has sighted as concerns in the past as they can be risky business for Canadians as they become over leveraged. In fact the government has actively taken steps to attempt to slow down the housing market and consumer spending with things like the B20 mortgage rules,  and more transparency with things like credit card debt.  When the economy is not getting it’s strength from manufacturing, service, or energy sectors I think it’s fair to say that things are not where they should be. 

Stephen Poloz has announced he will step down in June 2020 after 7 years as the governor of the Bank of Canada.  He  hasn’t had an easy job, and perhaps has done an outstanding job given what he has been tasked with.  It may be hard to see any real direction under his tenure but the economy has fared relatively well under his guidance when compared with others around the globe.  The next six months may be what defines his legacy.  My guess is that he will aim to hold things steady until June.  It’s the safe thing for him to do, but will it be the right thing? 

So what does this all mean for you the average Canadian?  First of all it’s not time to panic.  In fact a stumbling economy could work in your favor if your are in a variable rate mortgage as they normally become a little cheaper when the BOC lowers interest rates to spur the economy along.  The housing market could move to be more of a buyers market.  If it’s me I would be aiming to pay off consumer debt, free up cash flow, and if you have a mortgage its a real good time to have a review of your situation and see if you can capitalize on cheap interest rates.  Again like I always say,  be informed, prepared,  and ready to adapt to a changing landscape to find success. If the economy slows there will be opportunities, and first time buyers may find a friendlier environment.  Investors will enjoy low interest rates, and may seize the opportunity to expand their portfolio or to simply restructure their current holdings  mapping out the next 5-10 year plan, and securing lower interest rates.

We’re well into December get out there and get some Christmas cheer!

Happy holidays everybody!

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