The Canadian economy is performing stronger than it was during a difficult second quarter, according to the National Bank of Canada; but the Bank of Canada will likely hold its benchmark interest rate for the foreseeable future.
“We are keeping unchanged our Canadian GDP growth forecasts for both this year and next at 1.2% and 1.8% respectively. Unless the upcoming fiscal stimulus from the federal government is targeted effectively as to lift the economy’s potential, Canada will be stuck in low-growth mode,” National Bank’s economists said in their latest Economic Outlook. “Facing a lower real neutral interest rate, also a result of declining potential growth, the Bank of Canada will have no alternative other than keep the overnight rate low for years to come.”
On the positive side, exports saw an uptick in July and Canadian consumers are benefitting from the enhanced Canada Child Benefit, the authors said. “However, investment remains disappointing, hurting economic growth not just contemporaneously but also in the future via a lower potential.”
As for housing starts, the bank is forecasting slight softening across the country.
After averaging 190,800 starts a year since 2013 (including a forecasted 190,600 for 2016), National Bank is forecasting 176.900 starts in 2017.
Ontario is forecasted to have 64,500 starts next year (compared to 71,800 forecasted for 2016); British Columbia is expected to have 35,000 starts in 2017 (compared to a forecasted 42,100 this year).
However, Alberta is expected to see a slight uptick in starts. National Bank forecasts 24,200 in 2017, up from 2016’s expectation of 23,900.
See below for detailed stats
Sources: CMHC, Statistics Canada, National Bank
What agents need to know about the future of interest rates, housing across the country.