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Canadian Outlook Long-Term Economic Forecast: 2018

The Conference Board of Canada, 220 pages, January 25, 2018
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This annual economic forecast presents the long-term national outlook. The U.S. economic outlook is presented in a separate section.

Document Highlights

  • 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.

Table of Contents

EXECUTIVE SUMMARY

Chapter 1—U.S. Outlook

  • Overview
  • Assumptions
  • Aggregate Demand

Chapter 2—Demographics

  • Rapid Aging of Canada’s Population Shapes Demographic Outlook
  • Baby Boomers Driving Demographic Change
  • Population Aging: Not Exclusive to Canada
  • Components of Population Growth

Chapter 3—Monetary Policy

  • Slow Road to Monetary Policy Normalization
  • The Goal of Monetary Policy
  • Adoption of the Inflation Control Target
  • Monetary Policy in the Era of Price Stability
  • Real Interest Rates
  • Nominal Interest Rates
  • The Canadian Dollar

Chapter 4—Fiscal Policy

  • No Quick Fix for Budget Woes
  • Historical Perspective
  • Federal Forecast
  • Provincial Outlook
  • Municipal Governments
  • Canada’s Social Safety Net
  • Health Care Spending Pressures Mount
  • Education
  • Social Assistance
  • Public Pension and Old Age Security Programs
  • Employment Insurance

Chapter 5—Energy

  • Changing Global Environment Hurting Long-Term Outlook for Energy Sector
  • Long-Term Global Energy Outlook
  • Oil Markets
  • Natural Gas
  • Investment
  • Production
  • Trade

Chapter 6—Labour Markets

  • Population Aging Drives Labour Market Trends
  • Generations in Canada
  • Baby Boomers Delay Retirement
  • Echo Boomers and Millennials Stand to Benefit
  • The Changing Face of the Labour Force
  • Labour Force Growth and Participation
  • Key Labour Market Outcomes
  • Productivity
  • Natural Rate of Unemployment
  • The Changing Shape of Work in Canada
  • The Role of Business Cycles—A Historical Perspective

Chapter 7—Potential Output

  • Potential Output Growth Set to Slow
  • Modest Long-Term Growth for Potential Output
  • Gap Closure and Its Implications

Chapter 8—Aggregate Demand

  • Consumption
  • Housing
  • Business Investment
  • Engineering Investment
  • Government Spending
  • International Trade

Appendix A—Forecast Tables

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