June 9, 2008
Economy at a Glance - June 10, 2008
June 2008 Canadian economic outlook table
The table below sets out CanaData's latest forecasts of some of the key statistical series that are used to measure and assess the performance of Canada’s economy.
Real Gross Domestic Product (GDP) growth this year (+1.5%) will be about half of what might be considered normal and desirable (+3.0%). The loonie’s rise to parity with the greenback is acting as a drag on manufactured exports. Plus there are other negative fallouts from the slowdown that is currently underway in the United States.
The financial crisis seems to be fading and stability after a long decline in U.S. new housing markets is either finally here or is on the horizon. Business conditions will begin to improve both south and north of the border from this fall moving forward.
Inflation in Canada this year is being restrained by the year-over-year increase in value of the loonie versus the greenback, through the mechanism of import prices. The two cuts in the Goods and Services Tax (GST) have also helped. These effects will run out next year.
Labour markets have been so strong in Canada for years that some softening is inevitable. The unemployment rate will rise slightly and job gains will fall back to some degree over the three-year forecast period.
Corporate profits will take some time to turn around, now that they have weakened. The inventory-to-sales ratio in manufacturing, which is inversely related to strength in markets, will climb this year as the economy slows, but then gradually return to its historical average in 2009 and 2010.
Housing starts will moderate this year and next and then start to build momentum again in 2010. Interest rates are currently about as low as they are likely to go. With renewed GDP growth and rising prices, rates will start to march upward again next year and the following year.
Finally, the current round of intense speculation (as an alternative to stock market investments) that is driving up world commodity prices will eventually ease. This will cause the Canadian dollar to fall back slightly versus the U.S. dollar. However, a level near parity will still be the norm thanks to this nation’s resource wealth and the good health of Canadian government finances.
For more articles by Alex Carrick on the Canadian and U.S. economies, visit his blog and Market Insights.
Canadian Economic Outlook - June 2008
*The prime rate represents the cost to business of operating loans. The mid-term corporate bond rate (Bank of Canada web site) stands in for the cost of financing real estate and capital equipment purchases.
Data sources: Statistics Canada, Canada Mortgage and Housing Corporation (CMHC) and Bank of Canada. Table and forecasts: Reed Construction Data.
