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Canadian Outlook Economic Forecast: Autumn 2018

The Conference Board of Canada, 170 pages, November 7, 2018
Report
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This quarterly economic forecast provides highlights of the Canadian Outlook report, which presents the short-term national outlook.

Document Highlights

  • Although the economy performed well in the second quarter of 2018, growth will slow over the remainder of the year and into 2019.
  • The Canadian economy is projected to grow by 2.0 per cent in 2018 as a whole before slowing to 1.8 per cent in 2019.
  • Concerns over trade negotiations, carbon taxes, and a perception that Canada’s tax competitiveness has been eroded are hurting the willingness of firms to increase their capital spending.
  • A shortage of pipeline capacity has limited our ability to take advantage of higher world oil prices. The outlook for oil investment remains bleak.
  • Despite strong demand from the U.S., high capacity utilization in manufacturing is limiting our ability to increase our exports.
  • The economic acceleration in the second quarter took a significant chunk out of the economy’s excess capacity. Consequently, we expect the Bank of Canada to raise its policy rate again in October and three times more in 2019.

Table of Contents

EXECUTIVE SUMMARY

RÉSUMÉ

Chapter 1—Household Income and Employment

  • Slower Economy Results in Slower Pace of Hiring and Weaker Wage Gains
  • The U-Turn in Jobs Data
  • Wage Pressures Are Easing
  • The Labour Market Faces a Retirement Challenge
  • Labour Market Outlook Will Improve Slightly
  • Household’s Will Be Challenged by Rising Costs

Chapter 2—Household Consumption

  • Rapid Pace of Household Consumption Set for a Cool-Down
  • Consumption Growth to Be Hit With Three Cold Fronts
  • Weak Durable Goods Purchases to Drag Down Household Consumption
  • Stable Growth in Services Will Be Main Driver of Consumption

Chapter 3—Housing

  • Canada’s Housing Market Faces Ongoing Challenges
  • Forecast Underpinnings
  • Forecast
  • Local Housing Markets

Chapter 4—Government

  • Government Budgets Remain Under Pressure
  • Federal Fiscal Outlook
  • Provincial Fiscal Outlook
  • Government Consumption and Investment Spending

Chapter 5—Business Investment

  • Evaluating Canada’s Investment Performance
  • Investment Drivers
  • Industry Forecasts
  • Investment by Category

Chapter 6—International Trade

  • Breathing a Sigh of Relief
  • Trade Outlook
  • Challenged Export Sector Gets a Break
  • Imports Will Lose Some Steam in 2019
  • Non-Merchandise Trade Deficit Steadily Inches Up
  • Current Account Deficit Sees Modest Improvement in 2019

Chapter 7—Energy

  • LNG Canada Decision a Relief as Investment Climate Struggles in Western Canada
  • Canadian Price Wedge Growing
  • Oil Sands Investment Continues to Face Hurdles
  • Solid Increases in Short-Term Production

Chapter 8—Industry Trends

  • Industrial Output Growth Will Ease
  • Resource Sector Outlook Propped Up by Soaring Non-Metal and Mineral Fuels Activity
  • Construction Activity Eases in 2019
  • Manufacturing Sector Gets Some Relief
  • Outlook for Most Commercial Services Remains Positive
  • Demographic Trends Drive Non-Commercial Services Outlook
  • Public Administration Output Will Ease in 2019

Chapter 9—Financial Markets

  • Solid Growth Drives Interest Rates Higher
  • Upside Risk to Loonie With New Trade Deal
  • Hot U.S. Economy Keeps Interest Rates on an Upward Path
  • Monetary Policy in Other Countries

Appendix A—Forecast Tables

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