A rising Canadian dollar and a new report by the Conference Board of Canada are the most recent indicators that Canada’s economy is turning around, albeit slowly.
The Canadian dollar was trading above 73 cents US on February 4 for the first time since early December. The rising Canadian dollar is good news for manufacturers and other related businesses that rely on materials purchased in US dollars.
And a recent Conference Board of Canada report, Canadian Outlook: Winter 2016, it says while the economy will remain sluggish, it will not enter into a recession and forecasts economic growth at 1.7 per cent for 2016.
Although much of the recent weakness was contained to the energy sector, other areas of the economy, such as household spending, exports and manufacturing have failed to pick up the slack,” says Matthew Stewart, Associate Director, National Forecast. “Stronger economic growth will not happen until next year when a recovery in the non-energy sector is finally expected to take hold.”
Despite slow growth, there are brighter spots that will help lift the economy further.
Consumer spending has been one of the main drivers of economic growth over the last several years. However, faced with another year of weak employment and disposable income gains, combined with record high debt levels, Canadians will be hard pressed to open their wallets further in 2016. Overall, real consumer spending is expected to rise by 1.9 per cent this year.
Following a disappointing 2015, high hopes continue to be placed on the trade sector to fuel Canada’s economy. Despite the export sector’s sporadic performance, the weak Canadian dollar and stronger U.S. economy will allow the trade sector to contribute to overall economic growth in 2016. Export volumes are forecast to expand by 2.5 per cent in 2016, adding 0.6 percentage points to the Canadian economy.
Another area that is expected to provide a boost to Canada’s outlook is the public sector. The new federal government is expected to pump around $10 billion into the economy in fiscal years 2016-17 and 2017-18. This adds about 0.3 per cent to real GDP growth this year.