Canada to have one of fastest growing developed economiesStaff Writer | September 22, 2017
With strong economic growth in the first half of the year, the Canadian economy is expected to grow by an impressive 3.1 percent in 2017.
Canada The Conference Board
Strong consumer spending is fueling much of Canada’s stellar growth this year.
The labour market has been hot in Canada with employment surging out of the gate in 2017 and continuing its strong performance into August.
The economy has added 219,100 jobs so far this year—140,200 of which are full-time. Overall, employment is forecast to grow by 1.5 percent this year, the strongest annual growth since 2007.
The improved employment landscape has boosted consumer optimism supporting consumption in the first half of the year.
For each of the first two quarters of the year, consumption grew at an annual pace of over 4.5 percent.
With debt levels already at near-record highs, consumer spending will need to be better aligned with income growth going forward. In addition, cooling home prices will contribute to slower consumer spending.
Despite strong job creation, average wage growth has been anemic over the first half of the year. Overall, wage growth of only 1.4 percent is expected for the year.
With debt levels already at near-record highs, consumer spending will need to slow to remain in line with income growth going forward and, as a result, growth in consumer spending is forecast to slow to a 2.2 percent pace next year.
Business investment is finally picking up and expected to make a solid contribution to economic growth this year.
After declining by 19.2 percent over the last two years, real business investment is expected to increase by 1.3 percent in 2017.
The big driver of the turnaround in investment is increased spending by companies on machinery and equipment (M&E) to expand their productive capacity.
While the increase in business investment is good news the level of spending remains well below its previous highs and one of the key reasons why a slowdown in economic growth is projected next year.
Trade is expected to be a weak spot in Canada’s outlook. Although Canada’s export volumes expanded at a solid pace in the second quarter of 2017, a sharp appreciation of the Canadian dollar in the third quarter will cut into the sector’s performance for the rest of the year.
For the year as a whole, exports are expected to increase by 2.3 percent, fuelled mainly by soaring energy exports. ■