Financial Wire

UBS Updates Its Canada Macroeconomic Forecasts Amid High Oil Prices

UBS said it is taking on board the latest moves in oil prices into its Canadian inflation projections with the latest path implied by oil futures, with Brent reaching US$118 per barrel in the May contract before settling at around US$78/barrel by the end of the year and US$73/barrel by end 2027.With this, the bank now expects annual headline inflation of 2.9% this year and 2.4% in 2027. UBS estimates a strong 1.3% non-seasonally adjusted rise in headline inflation in March, carrying the year-over-year rate one percentage point higher to 2.8% in March.UBS predicts headline inflation will peak at 3.4% year over year in April before moderating from there.In the bank's growth projections, it expects a stronger pace of exports, but marked down business fixed investment and consumption.Overall, the bank's annual projections are little changed, with annual growth of 1.6% this year and 1.7% in 2027.The latest monthly gross domestic product data suggests an "okay" start to the year, with monthly GDP up 0.1% in January, a little better than the flat print in the flash estimate, and the flash estimate for February was a 0.2% month-over-month rise.After a strong broad-based decline in employment in February, UBS forecasts a "mild" 16,000 rise in employment in March, with the unemployment rate holding steady at 6.7% in the employment data to be published on Friday.

-- UBS said it is taking on board the latest moves in oil prices into its Canadian inflation projections with the latest path implied by oil futures, with Brent reaching US$118 per barrel in the May contract before settling at around US$78/barrel by the end of the year and US$73/barrel by end 2027.

With this, the bank now expects annual headline inflation of 2.9% this year and 2.4% in 2027. UBS estimates a strong 1.3% non-seasonally adjusted rise in headline inflation in March, carrying the year-over-year rate one percentage point higher to 2.8% in March.

UBS predicts headline inflation will peak at 3.4% year over year in April before moderating from there.

In the bank's growth projections, it expects a stronger pace of exports, but marked down business fixed investment and consumption.

Overall, the bank's annual projections are little changed, with annual growth of 1.6% this year and 1.7% in 2027.

The latest monthly gross domestic product data suggests an "okay" start to the year, with monthly GDP up 0.1% in January, a little better than the flat print in the flash estimate, and the flash estimate for February was a 0.2% month-over-month rise.

After a strong broad-based decline in employment in February, UBS forecasts a "mild" 16,000 rise in employment in March, with the unemployment rate holding steady at 6.7% in the employment data to be published on Friday.