(April 19 – 16:30 ET) – TD Bank economists say that today’s weak manufacturing data clears the way for a 50 basis point cut of our own at the Bank of Canada’s next rate meeting.

Following the 3.6% decline in manufacturing in February, the third drop in four months, TD is concluding, “There is now little doubt that the Canadian manufacturing sector is in recession — the only question is how deep and how prolonged the downturn will be.”

Declines were evident across almost all sectors, particularly tech, autos and energy. “And the bad news does not stop there,” says TD. “The real shocker is that the inventory-to-shipments ratio jumped sharply in February to 1.51 — its highest level since mid-1992 — implying that any meaningful increases in future demand will be partially met by liquidating built-up inventories, which can only weigh on output in the months ahead.”

The result of it all should be further interest-rate relief in the months ahead, says TD. It says the downturn in the United States has hit manufacturing with full force, and the pain should be spreading to other sectors, too. “While the Canadian economy will avoid a recession, more pervasive signs of weakness are likely to emerge during the spring. This should cement another 50 basis-point interest-rate cut at the Bank of Canada’s next announcement date on May 29.”