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Canada’s Carney Says Recent Data Is ‘in Line’ With Forecasts

Bank of Canada Governor Mark Carney said recent data are “broadly in line” with the central bank’s forecasts.

The following are selected comments from Carney at a news conference in Montreal.

On housing starts, and other recent data:

“They are slower than they were but they are still running above demographic demand or household formation to be more precise. We view household formation around 190,000 annualized.

‘‘They’ve slowed from a very rapid pace to a pace that is still above household formation.

‘‘Housing starts, particularly multiples, are well above historic average even adjusting for population.

‘‘In our forecast, we’re expecting this decreased contribution from housing relative to GDP, very clearly spelled out in our report, and in fact a drag from the housing sector on growth from now, so we are starting to see things that are consistent with that.

‘‘With respect to broader data in the third quarter, we have a relatively weak forecast for the third quarter, 1 percent, and the data is broadly in line with that. There are some timing issues that drive some of the output in the energy sector which shifts some growth between the third and the fourth quarter that still seems to be in line. But I wouldn’t over-interpret recent data and I certainly wouldn’t draw any connection to our monetary stance.’’

On central bank’s projections for stabilizing household debt:

‘‘We have a fairly modest outlook for the growth of disposable income. We don’t disclose it, but we don’t have a sharp increase in the growth of disposable income.

‘‘So I wouldn’t think there is a lot of downside risk to the income side since it’s relatively modest.

‘‘In our forecasts, the reason it would be less likely to happen is because borrowing continues, including home equity extraction and financing of renovation or other things through that.

‘‘The risks around household debt and finances are two-sided. While steps have been taken, and you know those steps by the federal government, OSFI and others to slow the rate of growth and achieve this stabilization, and there’s sort of conflicting signs of it working, there is a possibility that it decelerates much more rapidly than we expect.’’

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