HIGHLIGHTS
- The Conference Board of Canada
expects the Canadian economy to grow by just 1.6 per cent in
2015.
- A drop of 15.5 per cent in business investment in the first
quarter of this year was a major factor in tipping the Canadian
economy into a small contraction.
- Renewed economic growth is expected through the second half of
the year.
OTTAWA, July 29, 2015 /CNW/ - The contraction of the
Canadian economy in the first quarter of the year, lower oil
prices, a near-record trade deficit and uncertainty in global
markets have dimmed the growth outlook for Canada. The Conference Board of Canada expects the Canadian economy to grow by
just 1.6 per cent in 2015, its worst showing since 2009. This
represents a further downgrade from previous quarterly Canadian
Outlook releases.
"There has been much speculation on whether the Canadian economy
has dipped into recession," said Matthew
Stewart, Associate Director, National Forecast, The
Conference Board of Canada. "We
expect the numbers to show economic growth tracking close to zero
in the second quarter, as the economy flirts with recession. But
even if Canada slips into mild recession, we expect it to be
small and short-lived, with the economy picking up through
the rest of the year. There are also positive signs of growth as
the economy added 16,000 jobs a month on average over the first
half of the year which is better than what we saw through most of
2014."
Business investment will be the weakest part of the economy this
year, held back by deep cuts in the energy sector. Oil and gas
firms are expected to chop their investment by almost one-third,
plunging from $68.8 billion last year
to $52.5 billion this year. Outside
the energy sector, firms remain hesitant to invest. Purchases of
machinery and equipment suffered a substantial decline in the first
quarter of the year, and a decline in building permits suggests a
downturn in commercial construction in 2015. Overall, business
investment will drop by close to 7 per cent this year.
Household spending is also expected to weaken, despite savings
for consumers at the gas pump and federal tax cuts. Soft employment
growth, weak wage gains, high level of household debt and job
losses in oil producing provinces will combine to limit
growth in consumer spending to 2.1 per cent in 2015.
One of the bright spots in our outlook is the trade sector.
Despite disappointing numbers to date, Canada's trade sector is still expected to
make a significant contribution to overall economy growth. The U.S.
economy is expected to show momentum through the rest of 2015 and
with the Canadian dollar trading well below 80-cents-U.S., exports should manage growth of
3.1 per cent.
Economic growth should improve next year. However, with
Canada's potential output growth
slowing due to an aging population and lacklustre investment
outside of the energy sector, real GDP growth is not expected to
exceed 2.3 per cent at any point over the next five years.
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SOURCE Conference Board of Canada