E Canada’s Economic Outlook Has Suddenly Become Much Gloomier

Consumer spending is also expected to remain soft due to higher interest rates, the softening in the housing market, and a low personal savings rate.

While some of the trade uncertainty with the US has been resolved with the signing of the US, Mexico, Canada trade agreement, nonetheless the American tariffs of steel and aluminum are still hurting the Canadian economy. The continuing threat from tariffs and trade war concerns are curbing Canadian investment, and of course, hurting export sales.

Moreover, the major slump in oil prices and the huge disparity between Alberta oil prices and world prices has created a virtual recession in that important province. Cutbacks in output and investment in the oil & gas sector are coming as Alberta producers and its government grapples with record high oil inventories and sinking prices.

Additionally, the announced closing of the GM plant in Oshawa Ontario has also dampened prospects dramatically.  

Thus, the latest Canadian GDP figures as well as these two relatively new negative pieces of information (Alberta’s oil woes and the closing of the GM plant in Oshawa), have dampened prospects and are indicative of a further slowing of Canada’s economy in the fourth quarter, to perhaps as low as 1% annual growth.

One of the important implications from this array of bad news is that it is somewhat less likely that the Bank of Canada will increase its benchmark interest rate once again in January.

 

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