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Four Charts for Poloz to Ponder in Weighing Canadian Rate Hikes

Four Charts for Poloz to Ponder in Weighing Canadian Rate Hikes

(Bloomberg) -- Investors are hunting for clues Wednesday on whether Bank of Canada Governor Stephen Poloz is swayed by recent signs of economic weakness or sticks with his desire to boost interest rates back to neutral.

While his one-page decision is expected to keep borrowing costs unchanged, here is a sampling of data that highlight some of the headwinds facing Canada’s economy:

Four Charts for Poloz to Ponder in Weighing Canadian Rate Hikes

Citi’s Economic Surprise Index, which tracks the difference between market expectations for data and their actual values, has been trending at the lowest level since last summer and has been below zero since mid October -- around the time of the Bank of Canada’s last monetary policy report. That constant stream of disappointing numbers could give pause to central bankers that refer to themselves as data dependent.

Four Charts for Poloz to Ponder in Weighing Canadian Rate Hikes

The Macdonald Laurier Institute’s Leading Indicator fell 0.1 percent in October. The composite gauge’s first decline since January 2016 was largely driven by pullback in S&P/TSX Composite Index, which fell 6.5 percent on the month, as well as marked declines in commodity prices.

Four Charts for Poloz to Ponder in Weighing Canadian Rate Hikes

One consequence of moving from consumption-led growth is finding other sources of strength. The central bank has cited investment as a likely candidate, but recent data show spending on non-residential buildings, machinery and equipment fell for the first time in seven quarters between July and September and remains well below a peak set four years ago.

Four Charts for Poloz to Ponder in Weighing Canadian Rate Hikes

Interest-rate hawks can’t go on about inflation pressures with gasoline prices tumbling by about 25 Canadian cents back toward a dollar a liter since October. While policy makers said they were looking through some short-term price gains earlier this year, if inflation slips back to 2 percent before the bank’s January meeting the need for rate hike signals may fade too.

To contact the reporters on this story: Erik Hertzberg in Ottawa at eschmitzhert@bloomberg.net;Greg Quinn in Ottawa at gquinn1@bloomberg.net

To contact the editors responsible for this story: Theophilos Argitis at targitis@bloomberg.net, Stephen Wicary

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