Poloz of confusion

These are confusing times for anyone trying to make sense of what's happening in the Canadian economy -- and the Bank of Canada seems determined to add to the confusion.

Recall that back in January, Bank Governor Stephen Poloz surprised just about everyone by cutting the Bank's key interest rate by a quarter point, citing oil-based weakness in the economy. His comments to the media, then and subsequently, led most experts to forecast that another rate cut was imminent. By early March, however, Poloz signalled that the Bank in fact had plenty of time to assess whether the January move would prove effective; no further cut was forthcoming, and some pundits came to the conclusion that the latest mini easing cycle might be at an end.

Then, a week ago, Poloz was at it again, warning that growth in the economy in Q1/2015 would be "atrocious".  He could perhaps have timed his remarks better, because just a day later, StatsCan released GDP results for the month of January that showed a nugatory 0.1 percent decline -- disappointing, no doubt, but hardly atrocious. Now of course, Poloz was talking about the entire quarter, not just a single month, but the net result of his warning of impending doom and the subsequent blah data just added to the confusion. That's something central bankers should try to avoid.

And now this. Today the Bank has released its quarterly Business Outlook Survey, which is based on a survey of 100 companies across Canada.  Truth to tell, the report is not that bad: 80 percent of respondents say they will be hiring as many or more workers in the coming months as in the recent past, and the pace of overall sales growth is expected to remain near recent levels. There's weakness in the oil patch and related sectors, but companies with strong business links to the US are upbeat, reflecting both the weaker exchange rate and the continuing expansion in the US economy. The report may not be gangbusters, but it's not atrocious, either.

But how do the media portray it?  Well, check this out at the CBC website. It's true that the media will always look for the dark side of any story. Still, the Bank can have only itself to blame, in current circumstances, if a report that seems to show that the current policy stance, and especially the weak dollar, may be working as the Bank hopes, is presented to the public as new evidence that the economy is in precipitous decline. In the current jittery mood, that could prove to be a self-fulfilling prophecy.

It's not bad news for everyone, though.  It seems that Poloz's capriciousness has helped push volatility in the Canadian government bond market to the highest level seen in two decades. Lots of money to be made for astute Masters of the Universe, then.  I'm sure we're all happy about that.