The Bank of Canada (BoC) will have to wait a bit longer for its anticipated rotation of the economy toward exports and business investment. That means the central bank will maintain its accommodative stance toward monetary policy, including its target rate for overnight loans, which remains at 1 percent following its recent meeting.

Statistics Canada’s (StatCan) report on international merchandise trade for July showed that the country’s exports declined by 0.6 percent, to CAD39.2 billion, while imports rose by 0.6 percent, to CAD40.1 billion. That left Canada’s seasonally adjusted trade balance at a deficit of CAD931 million, which is wider than last month’s deficit of CAD460 million, as well as the trailing 12-month deficit of CAD777 million.

Prior to the Great Recession, the resource-rich nation routinely posted trade surpluses, which averaged CAD4.6 billion over the five-year period from the beginning of October 2003 through the end of September 2008. But since the beginning of 2010, there have been just nine individual months in which the dollar value of Canada’s exports exceeded imports, with the last such instance having occurred during a two-month stretch at the end of 2011.

The good news is that exports to the US, which is Canada’s largest trading partner, remained on a positive trend, up 0.8 percent month over month and 7.9 percent year over year, to CAD29.4 billion. Instead, the European Union was responsible for most of the falloff in exports, with the dollar value of goods sent to the Continent down 15.9 percent from a month ago and 21.7 percent from a year ago, to CAD2.6 billion.

Energy products, which accounted for 22.9 percent of total exports, increased 1.7 percent from a month ago and 16.7 percent from a year ago, to CAD9 billion. However, metal and mineral products, which accounted for 11.2 percent of total exports, dropped 7.3 percent from a month ago and are down 0.3 percent from a year ago.

The data underpinning the headline number for the Canadian economy’s second-quarter performance also support the BoC’s dovish approach toward monetary policy. That’s despite the fact that even with the impact of significant one-time events, such as historic flooding in Alberta and a province-wide strike in Quebec, Canada’s second-quarter gross domestic product (GDP) grew better than expectations.

The country’s GDP increased at an annualized rate of 1.7 percent, a tenth of a percentage point above the consensus forecast, based on a Bloomberg survey of economists, and seven-tenths of a percentage point greater than the BoC’s ultra-conservative projection.

Meanwhile, first-quarter growth in GDP, which initially came in at 2.5 percent, was revised lower to 2.2 percent. And for the third quarter, the BoC had previously forecast growth of 3.8 percent, due in part to an expected surge in spending following the aforementioned flooding and strikes. However, there’s speculation that this latter figure could be revised downward, as clearly at least some of the spending the central bank expected in the third quarter was pushed forward to the second quarter. The BoC provides its next update to its economic forecasts on Oct. 23.

While exports, particularly of energy products, metals and minerals, were the biggest contributor to first-quarter GDP, the country turned inward during the second quarter, with growth driven almost entirely by household consumption. Consumer expenditures rose at an annualized rate of 3.8 percent, the fastest pace since the fourth quarter of 2010, largely thanks to purchases of automobiles, which were up 4.7 percent sequentially, accounting for about one-third of the growth in household spending.

On the business spending front, fixed investment fell at an annualized rate of 2.5 percent, with spending on machinery and equipment falling by 2.1 percent, particularly in the industrial and computer categories. And growth in inventories decelerated to CAD5.2 billion from CAD7.7 billion.

Finally, after the first quarter’s 1.2 percent jump in exports of goods and services, growth in this area slowed to just 0.2 percent, though metals and minerals, which were up 4.8 percent, continued to be a significant contributor. However, exports of energy products were down sharply, by 6.3 percent.

Of course, a rise in exports and a corresponding boost in business investment are heavily dependent on a resurgent US economy. On this front, the data continue to be mixed. And given that the US Federal Reserve’s curtailment of its extraordinary stimulus is contingent upon a positive trend in such data, each statistic has received unusual scrutiny to determine its portent for the central bank’s policymaking.

Up until this morning’s disappointing jobs report, in fact, most economists and analysts believed that the recent flow of encouraging data pointed to a September taper of the Fed’s $85 billion per month bond-purchasing program, following the conclusion of the central bank’s next meeting of its Federal Open Market Committee (FOMC) on Sept. 18.

For instance, the Institute for Supply Management’s Purchasing Managers’ Index (PMI) for service industries, which account for a majority of the US economy, showed a reading of 58.6 percent for August, up 2.6 percentage points from the prior month and the highest reading since the index began in January 2008. A reading above 50 indicates expansion among the non-manufacturing sector of the economy.

Meanwhile, the PMI for the manufacturing sector, which accounts for about 12 percent of the US economy, came in at 55.7 percent, up three-tenths of a percentage point from July and the third consecutive month of improvement. Here, again, a reading above 50 indicates expansion in this sector.

And the New Orders Index jumped 4.9 percentage points, to 63.8 percent. According to economists, the rise in new orders, along with the fact that the inventories index showed just a modest gain of five-tenths of a percentage point while the index of customers’ inventories fell by 5 percentage points, suggests there could be further increases in production in the months ahead.

Finally, a steady decline in weekly unemployment claims to levels last seen just prior to the Great Recession seemed to augur well for a strong August jobs report. But the Bureau of Labor Statistics dashed these hopes: The latest report on employment shows that the apparent momentum from these other indicators has yet to translate into sustained, meaningful hiring activity.

Total nonfarm payrolls increased by 169,000 in August, falling short of the consensus forecast of 180,000 new jobs. At the same time, July’s figure was revised lower to 104,000 from 162,000, while the net revision for the prior two months was lowered by 74,000 jobs altogether.

Although employment gains over the past year have averaged 184,000 jobs per month, the nearer-term averages show a marked deceleration, to 160,000 jobs created per month over the past six months and 148,000 new jobs per month over the past three months. Job creation continues to be concentrated in lower-wage industries oriented toward part-time employment, such as retail and restaurants and bars.

And while the unemployment rate ticked lower by one-tenth of a percentage point, to 7.3 percent, once again, improvement in this figure was the result of a decline in the labor force participation rate, which fell two-tenths of a percentage point, to 63.2 percent, the lowest level since 1978.

Since this is the last release of significant economic data before the Fed’s upcoming FOMC meeting, it likely means the Fed will decide to defer any decision on the beginning of the end of its quantitative easing. The financial markets have shown considerable evidence of their dependence on the Fed’s largesse, so presumably any postponement of the inevitable will help support equities in the near term, particularly dividend-paying stocks.

On the other hand, it remains to be seen how dividend-paying securities will respond to a waiting game for an action that’s ultimately inevitable. After all, the liabilities on the Fed’s balance sheet currently stand at an incredible $3.6 trillion, so it stands to reason that easing can’t simply continue in perpetuity. But even if dividend stocks don’t get a bump from the Fed’s delay, historical data have shown that these securities can still outperform the broad market during a rising-rate environment, thanks to the power of reinvesting dividends.

Bay Street Beat

A majority of our Portfolio companies had already reported earnings by the time we published last month’s issue, so we’ve already covered most of the key changes in analyst sentiment. However, a handful have released their numbers since then, with Student Transportation Inc (TSX: STB, NSDQ: STB) the only company remaining that has yet to report. It’s scheduled to release its earnings on Sept. 11.

Bird Construction Inc’s (TSX: BDT, OTC: BIRDF) second-quarter numbers beat analysts’ estimates by 5.4 percent on the top line, but fell short on earnings per share (EPS) by a significant 85.1 percent, the second consecutive quarter in which EPS diverged widely from forecasts.

However, on Sept. 5, the company announced that it had won CAD175 million in new contracts for civil and building construction activity for industrial and institutional clients. This appears to have prompted two analysts to upgrade their ratings: Both Canaccord Genuity Corp and GMP raised their ratings to “buy” from “hold,” though their 12-month target prices remained the same.

The overall mix of analyst sentiment improved to four “buys,” four “holds,” and no “sells.” But the 12-month price target fell to CAD12.64 from CAD13.08. That suggests a potential return of 4.1 percent above the current share price.

Since last month, Davis + Henderson Corp (TSX: DH, OTC: DHIFF) has come off the restricted list at four brokerages (for more on what that means, please see our note above the listing below), so we now have meaningful data to report. As a quick refresher, the company beat analysts’ estimates for earnings per share by 19.6 percent, the first upside surprise in three quarters. It also exceeded forecasts for sales by 10.1 percent.

Of particular significance is the fact that 12-month target prices improved across the board, rising to a consensus target price of CAD27.57 from CAD24.07. However, the stock has also climbed higher since then, so the new consensus target only represents a potential return of 2.5 percent above the current share price.

EnerCare Inc’s (TSX: ECI, OTC: CSUWF) second-quarter numbers blew past analysts’ estimates on earnings per share by 41.7 percent, but only narrowly beat forecasts for sales by 1.1 percent.

Even so, the mix of analyst sentiment remained static, while the consensus target price declined slightly to CAD10.75 from CAD10.88.

Northern Property REIT’s (TSX: NPR-U, OTC: NPRUF) second-quarter funds from operations, the relevant measure of profits for a real estate investment trust (REIT), missed analysts’ estimates by just 0.2 percent. On revenue, it fell short of forecasts by 3.2 percent.

Although the mix of analyst sentiment improved to six “buys,” three “holds,” and one “sell,” the consensus 12-month target price fell to CAD30.25 from CAD32.56. The new consensus target price represents a potential return of 10.8 percent above the current unit price.

Both Scotia Capital and CIBC World Markets raised their ratings to “sector outperform,” equivalent to a “buy,” from “sector perform,” or “hold.” Meanwhile, EVA Dimensions lowered its rating to “hold” from “overweight,” or “buy.”

Pembina Pipeline Corp (TSX: PPL, NYSE: PBA) beat analysts’ estimates by a substantial margin on both earnings per share (EPS) and revenue. For EPS, it exceeded forecasts by 18.3 percent, while revenue bested expectations by 33.3 percent.

Nevertheless, both the mix of analyst sentiment and the consensus 12-month target price barely budged from last month. The consensus target improved to CAD36.05 from CAD35.50, which represents a potential return of 12.5 percent above the current share price.

Ag Growth International Inc’s (TSX: AFN, OTC: AGGZF) second-quarter numbers fell short of analysts’ estimates by 30 percent on earnings per share and 1.6 percent on revenue.

Nevertheless, Scotia Capital raised its rating to “sector outperform,” which is equivalent to a “buy,” from “sector perform,” or “hold.” The remaining analysts reaffirmed their ratings.

Interestingly, the consensus 12-month target price showed a sizable improvement, rising to CAD39.78 from CAD36.89. The new consensus target price represents a potential return of 10.3 percent from the current share price.

Peyto Exploration & Development Corp’s (TSX: PEY, OTC: PEYUF) second-quarter numbers missed analysts’ estimates by 9.1 percent on earnings per share and 10.2 percent on sales.

In response, two brokerages reduced their ratings: FirstEnergy Capital Corp lowered its rating to “outerperform” from “top pick,” though for sentiment purposes both of these ratings are treated as equivalent to “buys,” while Salman Partners lowered its rating to “hold” from “buy.”

However, two other brokerages actually boosted their ratings: EVA Dimensions raised its rating to “underweight” from “sell,” though for sentiment purposes both designations are treated the same, and Macquarie upped its rating to “outperform,” or “buy,” from “neutral,” or “hold.” Meanwhile, Dundee Securities Corp initiated coverage at “neutral.”

The consensus 12-month target price only moved marginally lower, to CAD33.40 from CAD33.84.

In the listing below, the number of analyst “buy,” “hold” and “sell” ratings for each company are shown, followed by the average 12-month price target among the analysts for which we have access to such data.

Month-over-month variances in the number of analysts listed below for each stock are often due to those securities being on a brokerage’s restricted list for a brief period. A restricted list is a compliance measure that’s typically used during the period when the investment banking side of an analyst’s firm is involved in advising the company.

Conservative Holdings

• AltaGas Ltd (TSX: ALA, OTC: ATGFF)–5–3–1 (CAD40.50)
• Artis REIT (TSX: AX-U, OTC: ARESF)–7–3–0 (CAD17.21)
• Bank of Nova Scotia (TSX: BNS, NYSE: BNS)–10–8–2 (CAD63.54)
• Bird Construction Inc (TSX: BDT, OTC: BIRDF)–4–4–0 (CAD12.64)
• Brookfield Real Estate Services Inc (TSX: BRE, OTC: BREUF)–0–1–0 (CAD13.50)
• Brookfield Renewable Energy Partners LP (TSX: BEP-U, NYSE: BEP)–10–1–1 (CAD32.15)
• Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF)–9–3–0 (CAD25.34)
• Cineplex Inc (TSX: CGX, OTC: CPXGF)–4–6–1 (CAD39.85)
• Davis + Henderson Corp (TSX: DH, OTC: DHIFF)–5–3–0 (CAD27.57)
• Dundee REIT (TSX: D-U, OTC: DRETF)–4–2–0 (CAD35.10)
• EnerCare Inc (TSX: ECI, OTC: CSUWF)–4–2–0 (CAD10.75)
• Innergex Renewable Energy Inc (TSX: INE, OTC: INGXF)–7–3–1 (CAD10.60)
• Keyera Corp (TSX: KEY, OTC: KEYUF)–6–5–0 (CAD63.50)
• Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–6–3–1 (CAD30.25)
• Pembina Pipeline Corp (TSX: PPL, NYSE: PBA)–8–3–1 (CAD36.05)
• RioCan REIT (TSX: REI-U, OTC: RIOCF)–5–5–0 (CAD28.33)
• Shaw Communications Inc (TSX: SJR/B, NYSE: SJR)–5–8–4 (CAD25.14)
• Student Transportation Inc (TSX: STB, NSDQ: STB)–2–3–1 (CAD7.48)
• TransForce Inc (TSX: TFI, OTC: TFIFF)–7–4–0 (CAD22.77)

Aggressive Holdings

• Acadian Timber Corp (TSX: ADN, OTC: ACAZF)–0–1–1 (CAD12.50)
• Ag Growth International Inc (TSX: AFN, OTC: AGGZF)–5–4–1 (CAD39.78)
• ARC Resources Ltd (TSX: ARX, OTC: AETUF)–7–10–0 (CAD29.39)
• Atlantic Power Corp (TSX: ATP, NYSE: AT)–0–7–2 (CAD4.77)
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–1–5–0 (CAD18.00)
• Crescent Point Energy Corp (TSX: CPG, OTC: CSCTF)–19–1–1 (CAD46.35)
• Enerplus Corp (TSX: ERF, NYSE: ERF)–10–6–1 (CAD19.78)
• Extendicare Inc (TSX: EXE, OTC: EXETF)–0–3–2 (CAD6.94)
• Lightstream Resources Ltd (TSX: LTS, OTC: PBKEF)–4–13–1 (CAD9.50)
• Newalta Corp (TSX: NAL, OTC: NWLTF)–9–0–1 (CAD18.08)
• Noranda Income Fund (TSX: NIF-U, OTC: NNDIF)–1–0–0 (CAD8.00)
• Parkland Fuel Corp (TSX: PKI, OTC: PKIUF)–6–4–0 (CAD19.22)
• Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF)–10–6–2 (CAD33.40)
• Vermilion Energy Inc (TSX: VET, OTC: VEMTF)–11–5–1 (CAD61.34)
• Wajax Corp (TSX: WJX, OTC: WJXFF)–2–7–0 (CAD36.00)