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Canadian Economy Slows but Conditions in Place for Better Growth Ahead

Conference Board of Canada lowers growth projection for 2019.

Ottawa, March 20, 2019—The Canadian economy is expected to grow by just 1.4 per cent in 2019, according to The Conference Board of Canada. According to the Conference Board’s National Economics Team, the Federal Budget released March 19th is unlikely to affect the economic outlook.

“The weak growth that was evident at the end of 2018 is expected to persist into the first half of 2019. Despite this weak growth, there are reasons to be cautiously optimistic,” said Matthew Stewart, Director of Economics. “Job gains and wage growth were strong at the beginning of the year. In addition, the anticipated impact on investment from the measures contained in the federal government’s fall economic statement have yet to materialize.”

Canadian Outlook: Spring 2019 Report Highlights

  • Consumer spending slowed sharply at the end of last year, but household income growth is expected to pick up substantially this year, thanks to robust job gains and an acceleration in wage growth.
  • The housing market will continue to cool this year with a decline forecast in residential investment.
  • Falling business confidence and weakening global and domestic demand have held back investment spending recently. Still, business investment is set to improve outside of the resource and residential sector this year. One of the main factors supporting this turnaround is the accelerated depreciation measures, announced in the federal government’s last Fall Fiscal Update, which will allow business to write off 100 per cent of some capital expenditures in a single fiscal year. Improving domestic demand will also help support strong non-energy investment.
  • Oil and gas investment is set to post its fifth consecutive annual decline. The industry continues to be plagued by insufficient transportation capacity, and the news in early March that Enbridge’s Line III would be delayed was just one more blow. The lack of clarity on whether other planned pipeline projects will ever get built and the forced production cuts are also weighing on business confidence in the sector.
  • What will support GDP growth this year is the trade sector. Despite a pullback in energy exports, total exports are expected to gain 2.0 per cent this year. With imports remaining essentially flat, the trade sector will support real GDP growth of 1.4 per cent this year. The outlook for next year is much brighter with investment spending forecast to help the economy post growth of 2.0 per cent.
  • Given the economic slowdown, the Bank of Canada will remain on the sidelines this year with rate hikes not expected until 2020 under the assumption that the economy improves as expected over the second half of this year.
  • A turnaround in business investment is required to push the economy to 2.0 per cent growth next year.

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