Canadian Outlook Economic Forecast
This quarterly economic forecast presents the short-term national outlook.
- The Canadian economy is projected to grow by 2.1 per cent in 2018 before slowing to 1.9 per cent growth in 2019.
- Household spending has been driving economic growth over the last several years but will ease in the face of high household debt loads, rising interest rates, and soft wage growth.
- Residential construction will fall, pulled down by the lower demand for new homes and a weaker outlook for renovation spending.
- Energy investment will remain weak due to ongoing weakness in Canadian oil prices. Energy exports will decline as low investment takes a toll on future production and government-mandated production cuts take effect in Alberta.
- Stronger economic growth will depend on improved business investment and a better performance from the non-energy trade sector.
Canadian Outlook Bulletin
This briefing provides highlights of our quarterly Canadian Outlook report, which presents the short-term national outlook.
- High debt levels, rising interest rates, and falling house prices are leading to a pullback in the pace of consumer spending and overall economic growth.
- Canada’s export sector will remain on shaky ground over the near term as rising protectionist measures from the U.S., and continued uncertainty surrounding the outcome of the NAFTA renegotiations, dominate and undermine the sector’s outlook.
- Despite the pickup in inflation and wages since the beginning of this year, the Bank of Canada will remain cautious, as it gradually reduces monetary stimulus from the economy over the near term.
Canadian Outlook Long-Term Economic Forecast
This annual economic forecast presents the long-term national outlook. The U.S. economic outlook is presented in a separate section.
Following a year of stunning gains, Canadian economic growth is projected to sink back below 2 per cent in 2018. Growth is unlikely to exceed 2 per cent again within the foreseeable future.
After falling almost 20 per cent over the last two years, business investment eked out a small increase in 2017. Further increases will likely be moderate. As such, total business investment is unlikely to return to its 2014 highs until the middle of the next decade.
Household consumption has been driving the economy’s recent strong performance, but consumers’ ability to spend will lessen over the next several years due to high consumer debt levels, a cooling housing market, and slowing employment growth.
Given the recent weakness in business investment and the above-potential growth over the last year, the economy is butting up against capacity constraints. We expect the economy to be operating at close to full potential next year. After that, economic growth will be constrained by weak potential output growth.
The withdrawal of the baby boomers from the workforce over the forecast will increase the retirement rate, put downward pressure on the participation rate, and result in slower potential output growth.