Economic growth in Canada has been weak in 2016 and will pick up slightly next year but will remain below potential because of low business investment and weak export growth, the Conference Board announced October 27.
Business investment is the weakest part of the country’s economy, the board said. Investment fell 7% this year, leading to economic growth of only 1.3%. The sector with the biggest decline this year has been energy, but non-energy investment has not fared much better. Over each of the next two years, investment is expected to increase by 2.2%, pushing next year’s overall economic growth to 2%.
“Canada’s economic growth this year will barely be higher than last year’s 1.1%, which was the worst showing since the 2009 recession,” said the Conference Board’s associate director of national forecast Matthew Stewart. “Looking ahead, Canada will be lucky to see growth above 2% over the next few years due to the aging population, weak productivity growth and the persistent lack of business investment.
“A turnaround in business investment will be critical to support Canada’s future economic growth.”
Exports are expected to increase 0.6% in 2016, held back by weak growth in the United States. As the U.S. economy is forecast to improve next year, exports are expected to improve.
Most of this year’s economic growth is due to an expected 2.1% increase in consumer spending. This growth will come in spite of slow employment and wage growth. An expected 107,000 new jobs are expected to be added this year in Canada, which is the lowest increase since the 2008 recession. Job growth is not expected to hit pre-recession level next year. Wage growth is expected to be modest over the next year or more due to labour market slack. This, in combination with increasing debt levels, will put a damper on consumer spending next year.
Some of 2017’s growth will be a result of government infrastructure spending, as well as improving exports and private sector investment.
@EmmaHampelBIV
Check out BIV’s podcast for the week of October 24, 2016:
