Canadian economy expected to slow

Shift will reflect weaker consumer spending and the impact of a slowing global economy

Mario ToneguzziA new report by Deloitte Economic Advisory says the Canadian economy is at a crossroads in the business cycle – either strong economic growth will lead to inflationary pressures, or growth will slow to a more moderate and sustainable rate of expansion.

But the outlook is anticipating the Canadian economy will slow down to two per cent of real gross domestic product growth this year after growth of three per cent in 2017.

It is also forecasting the economy to edge slightly lower in 2019 and fall to 1.4 per cent by 2020.

This will reflect weaker consumer spending and the impact of a slowing global economy, with U.S. protectionism still posing a key international risk. Tighter monetary policy in North America and Europe will also play a role in tempering growth, but such policy also presents risks, said the report.

“The signs that the North American economy is in the late stages of a business cycle are all around us, from a record long bull market in U.S. equities to low unemployment rates and rising central bank rates,” said Deloitte Canada’s chief economist, Craig Alexander. “The negotiation of USMCA reduces the downside risks to the Canadian economy, and economic growth should persist. However, businesses should still prepare for more moderate domestic demand growth and a weaker U.S. economy over the medium term.”

High household debt, rising interest rates, flat real estate markets, and weaker employment growth will all temper consumer spending in 2019 and 2020, added the report.

“The cloud of uncertainty created by the renegotiation of NAFTA has been lifted, a positive for business investment. Capital spending will be a larger contributor to economic growth in 2019 and 2020, but firms are still expected to be cautious in their outlays,” said Deloitte.

“The global economy is expected to deliver strong growth of close to 4 per cent in 2018, but the pace of expansion will drop to 3.2 per cent in 2020. Real GDP (in the United States) to climb three per cent this year, fuelled in part by tax stimulus. But as stimulus declines, fiscal drag will kick in; growth is expected to slow to well below two per cent by 2020.”

Mario Toneguzzi is a veteran Calgary-based journalist who worked for 35 years for the Calgary Herald, including 12 years as a senior business writer.

Canadian economy

The views, opinions and positions expressed by columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of our publication.

You must be logged in to post a comment Login