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MP-Report

Economic forecast positive

The July Monetary Report by the Bank of Canada has been released and the economic outlook is generally positive.

It confirmed assertions by the government that the economy continues to be supported by solid job and wage growth.

To help inform constituents about the strength of the Canadian economy, here are some of the Report’s highlights:

  • GDP growth is expected to increase from 1.3% in 2019 to about 2% in 2020 and 2021, slightly above potential growth.
  • Growth in the economy is expected to be broad-based: Investment and exports are projected to expand at a moderate pace and consumer spending is expected to grow steadily, supported by sustained income gains, which include climate action incentive payments from the federal government, and solid consumer confidence.
  • Paying attention to Canadian household spending, consumption has rebounded and continues to be supported by a solid labour market; wage growth has picked up, unemployment is still near historic lows and employment is strong, partly due to growth of the working age population resulting from increased immigration.
  • Household imbalances, as measured by the ratio of household debt to income, have stabilized, and mortgage stress testing has improved the quality of mortgage borrowing.
  • The housing market is evolving as expected at the national level as major markets, including the Greater Vancouver Area, adjust to previous speculative activity and changes in housing financing conditions.
  • At the same time, interest rates on five-year fixed-rate mortgages have fallen recently to around where they were five years ago, which is relevant for people buying a new house or renewing their mortgage. It also reinforces the view that residential investment is once again contributing to growth.
  • While the oil sector continues to undergo significant adjustment, investment in this sector is forecast to stabilize by 2020, and its exports should gradually increase. Despite challenges, the sector continues to contribute $65 billion annually to the Canadian economy. In addition, construction related to Trans Mountain and to the liquefied natural gas terminal in British Columbia will add to business investment, while investment outside the oil and gas sector is still expected to expand.
  • Recent export data for Canada have been encouraging. Exports are forecast to grow moderately over the projection horizon, supported by the ongoing expansion of foreign demand.
  • The most important risks to the Canadian economy are related to global trade policies. Because protectionist trade policies can disrupt trade flows and global value chains, they can simultaneously lower output and put upward pressure on prices. While the lifting of tariffs with the U.S. has been positive, recent actions by China, as well as ongoing uncertainty in US–China trade are concerning.
  • Nevertheless, the bank assesses that upside and downside risks to the projected path for inflation are roughly balanced and are expected to hold near or at the target rate of 2%.

The Bank of Canada is the nation's central bank led by chief executive officer, Stephen Polos who was appointed in 2013 for a seven-year term.

The  full report can be found at www.bankofcanada.ca

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About the Author

Stephen Fuhr was born in Edmonton, AB and grew up in Kamloops, BC. He is a former CF-18 fighter pilot with the Canadian Air Force.

After serving with distinction for 20 years, Stephen retired from the Canadian Forces in 2009 with the rank of Major. He joined his family’s Kelowna-based company, SkyTrac Systems, which develops aviation communication and tracking equipment. As CEO and Director of Business Development, he led the company to financial success in a challenging economic climate.

In 2012, Stephen left the company to pursue his first love of flying.

With growing interest in politics and a desire to serve his country again, Stephen ran for office in the 2015 election.

Today, he proudly serves as the Member of Parliament for the Kelowna-Lake Country riding. 



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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