Growth in the Canadian economy was disappointing in the first quarter of 2018, growing at just 1.3 per cent. That was well below the 2 per cent consensus forecast of economists. Slow growth was the result of a moderation in household spending, which grew at its slowest rate since 2015, and a decline in residential investment. On the positive side, business investment was strong with purchases of machinery and equipment up 4.2 per cent and investment in commercial and other non-residential structures up 1.5 per cent.
Although economic growth slowed in the first quarter, the Canadian economy is still operating at or above capacity. We expect the Canadian economy to grow at a 2 to 2.5 per cent annual rate in 2018, which is above its estimated long-run trend rate of 1.7 per cent. As a consequence, inflationary pressure are building and interest rates are very likely headed higher as early as the Bank' of Canada's July meeting.
Copyright British Columbia Real Estate Association. Reprinted with permission.