Chief Economist and Managing Director for BMO Financial Group
Q: In terms of trade and the new NAFTA deal, what does that mean for Canada?
“The consumer and the housing sector have been the workhorses for the Canadian economy since the recovery began almost ten years ago. We've relied almost exclusively on the two cylinders of housing and big-ticket spending, and they both have clearly taken a big step back in recent months.”
- The U.S.-China trade negotiations are arguably the biggest economic risk.
- Steel and aluminum tariffs still weigh on Canada and could shave half a percentage off growth if they continue. Expect the USMCA to pass, but it could turn into a political pawn between Canada and the U.S.
- With global oil prices down $15 on average, expect modest business investment because of the uncertainty in the energy sector.
- Domestic spending is slowing, as both consumer spending and the real estate market have taken a step back.
- There is, however, support in growth from robust population increases, as Canada’s population rose by 1.4% last year — the strongest increase since the early 1990s.
- Overall, Canadian growth should be at 1.75% after inflation — down from last year’s 2% growth.
- Canada’s unemployment will remain above 5.5%, which is still the lowest its been in over 40 years.
- Average inflation will be less than 2%, which will be just enough for the Bank of Canada to nudge rates slightly higher. Two rate hikes are likely.