The economic outlook for Canada is looking a little “dim”. With a reduced amount of business investment, low oil prices and a near record trade deficit, some experts have gone as far as to say the country’s economy has dipped into a momentary recession.
“Two negative quarters of growth is typically the definition of recession but we like to look a bit beyond that. Beyond the overall number of GDP, there is actually a lot of good news,” said Matthew Stewart, associate director with The Conference Board of Canada.
“Employment has averaged about 16,000 new jobs a month over the first half of this year and while that’s not great, it’s more than twice the pace of last year, and all of these have been full time jobs. There is also a pickup in average wage growth and we expect to see the economy pick up quite strongly in the second half of the year.”
Presently, however, business investment in the energy sector has seen a large decline in the first quarter and is expected to continue into next year. The decline is also being seen outside of the energy sector as well with large drops in both commercial and industrial building construction. Stewart attributes this lessened amount of investment to a weakness in confidence by investors and a lack of growth in exports.
The cause of the trade deficit, according to Stewart, has to do with problems in the U.S. and the fact they are Canada’s biggest trade partner.
“The U.S. was off to a pretty weak start. They had ports shutdown, they also had a port strike and they also had a pretty cold winter. So the United States’ economy got off to a pretty poor start,” he said. “We were expecting pretty strong growth in the United States. The United States is still the source of the majority of our exports, so that took a real big toll on our trade sector, which we had thought was going to lead the way this year.”
Despite the doom and gloom, the nation’s economy is supposed to pick back up substantially through the second half of the year. Next year Stewart also expects stronger growth, which will be led by exports from what he hopes will be a stronger U.S. economy, and this boost in exports should regain the confidence of business investors.
“That’s really the critical factor that we haven’t seen in a couple of years, which is the terrible business investment. We really have to see a pick up in investment to see any kind of pick up in growth but we think that will come with stronger exports later this year.”