The Canadian economy rebounded from a first half contraction, growing 2.3 per cent in the third quarter in spite of a slowdown in the month of September. Economic growth was led by a 2.3 per cent gain in exports of goods and services, more than four times the rate of export growth recorded in the second quarter. Household consumption rose 0.8 per cent and residential investment grew 0.6 per cent. Business investment in machinery and non-residential structures continued to feel the effects of low commodity prices, falling 1.1 per cent and 1.7 per cent respectively. Growth for all of 2015 will likely register a paltry 1.2 per cent with stronger second half growth offsetting consecutive negative quarters in the first half of the year.
The outlook for growth in 2016 remains weighed down by low oil prices and the associated struggles in Canada’s energy producing provinces. Higher oil prices would provide a welcome boost to economic growth, but increasing prices are contingent on more robust global demand which may not materialize. In addition, the economy may have to adjust to a slight increase in mortgage rates which could temper the pace of residential construction and home sales. Offsetting these downside risks is that the low Canadian dollar should continue to provide a boost to the trade and manufacturing sector. Overall, we forecast growth in the Canadian economy will pick-up next year to 2.4 per cent.
Copyright BCREA – Reprinted with permission