While it fired on all cylinders through much of 2017, the Canadian economy shifted to a lower gear towards the end of the year — and the slowdown is expected to continue in 2018. The economy is forecast to expand by 1.9 per cent this year, down from 3.0 per cent in 2017, according to the Conference Board of Canada’s latest Canadian Outlook.
“Rising interest rates, moderating employment growth and high household debt will force consumers to reduce their pace of spending this year,” said Matthew Stewart, Director, National Forecasting, The Conference Board of Canada, in a news release.
“The hope that trade and business investment would pick up the slack is unlikely to come to fruition as uncertainty surrounding NAFTA negotiations and the possibility of increased tariffs are challenging businesses and exporters alike.”
Job gains are expected to slow to 232,000 jobs, down from 336,900 last year. A tight labour market however, will help to support wage growth, which could help to cushion the impact of rising interest rates, according to the release.
While household spending remains the main driver of economic growth, the pace of spending is likely to ease significantly and purchases of durable goods could bear the brunt of the slowdown. Real personal consumption is expected to increase by 2.4 per cent, down from 3.5 per cent last year.
Other factors point to a cooling of the housing market, underperforming exports and another disappointing year for business investments.
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