The Canadian economy expanded at a 3.5 per cent annual rate in the third quarter, a sharp rebound following a 1.3 per cent decline in the second quarter. Household consumption remained a significant driver of economic growth last quarter, aided by a rise in disposable incomes, while export growth posted a strong rebound after declining in the second quarter. A build up in business inventories suggests that growth will moderate closer to trend growth of 2 per cent in subsequent quarters. Overall, the Canadian economy is on trace to grow just 1.2 per cent in 2016.
While there are clear downside risks to the Canadian economy over the next year, with the uncertainty introduced by the incoming Trump administration front and centre, we expect the Canadian economy will post stronger growth in 2017. The US economy is improving and could see a further short-term uptick in growth if Congress approves of the incoming administration’s more stimulative ideas. Moreover, higher oil prices will boost growth in Canadian exports and stabilize the economies of Canada’s energy producing regions. Overall, we are forecasting growth of 2.1 per cent next year and 2.3 per cent in 2018. Despite stronger growth and inflation gradually returning to its 2 per cent target, we expect that the elevated level of uncertainty, particularly with regard to international trade, will keep the Bank of Canada sidelined through 2017.
Copyright British Columbia Real Estate Association. Reprinted with permission.