Fort McMurray wildfire, capital spending cuts to inhibit Canadian growth, though U.S., other advanced economies to fuel expansion
TORONTO—Facing softer-than-expected export figures, lackluster business investment and the heavy toll from persistent Alberta wildfires, the Canadian economy is now expected to grow by just 1.4 per cent this year, according to latest RBC Economics Outlook.
“This erratic roller coaster of economic activity means the Canadian economy is headed for another year of moderate growth,” Craig Wright, senior vice-president and chief economist at RBC, said. “Canadian consumers are propelling the domestic economy, with auto and home sales at record or near-record levels, and at this point their debt loads appear to be manageable.”
After an expected one per cent decline for the second quarter of the year, RBC anticipates the economy will begin firing again in the second half of the year—fuelled by recovering oil production, a construction boom to rebuild fire-ravaged Alberta and a likely rise in exports.
“Third-quarter real GDP growth is forecast at 4.0 per cent, slowing to 2.1 per cent in the fourth quarter,” the bank said.
Still, RBC said capital spending cuts are a worrying sign.
“It’s no surprise that energy companies continue to cut back, but a recent Statistics Canada survey on capital expenditures showed that companies outside the energy industry also plan to invest less this year, and that’s cause for concern,” Wright said.
Outside Canada, RBC said U.S. economic data points to an upswing, but that global markets remain “patchy.” The bank anticipates “subdued” economic activity in emerging economies, while it expects low energy prices and interest rates to allow most advanced economies to inch forward in 2016.