Latest economic trends at a glance
With Donald Trump as President of the United States, there’s more uncertainty about our economic prospects – and greater overall insecurity. It’s hard to predict where Trump’s right-wing policies will lead, and what the impact will be on Canada. But these are some likely economic directions.
|Economic growth:||Trump’s plans for massive tax cuts and infrastructure spending will provide short-term economic growth, but create problems down the road. Canada’s economy could get a bump from exports, but could also get slammed by tariffs and trade actions. Our economy is forecast to grow by two per cent in 2017 and 2.1 per cent in 2018, with longer-term growth between 1.4 and 1.8 per cent.|
|Jobs:||Trump has promised to create millions of jobs – for Americans. The U.S. jobless rate is down to 4.7 per cent and expected to fall to 4.2 per cent. Canada’s job growth was slow last year because of the decline in the resource sector and austerity. Job growth is expected to pick up, bringing the unemployment rate down to 6.8 per cent in 2017 and 6.7 per cent in 2018 – unless auto and other export-focused sectors get hit by Trump on trade.|
|Wages:||Despite falling unemployment rates, Canadian and American workers have had little in the way of wage increases. Increases in major collective agreements settled in Canada averaged just 1.3 per cent in 2016, slightly below a 1.4 per cent increase in consumer price inflation. Average hourly earnings increased by just 1.1 per cent. Trump’s stimulus could result in some long-overdue real wage increases but they’ll be counteracted by his anti-labour and privatization policies. In Canada, base wages for CUPE members are expected to increase by an average of just 1.5 per cent this year, reflecting slow economic growth, as well as wage freezes and public sector austerity in some provinces.|
|Inflation:||Inflation is expected to rise next year, thanks in part to both U.S. stimulus and the recovery in oil prices. After rising by just 1.1 per cent in 2015 and 1.4 per cent in 2016, Canada’s consumer price inflation is forecast to average about two per cent in 2017 and thereafter.|
|Interest rates:||Stronger U.S. economic growth and an expected rise in inflation mean we’re finally seeing increases in interest rates, especially long-term ones, after they hit record lows last year. Canadian short-term rates, including the Bank of Canada target rate and business prime rates, probably won’t increase until 2018. On average, forecasters expect longer-term rates to increase by about 50 basis points (or half a per cent) over the next two years. This will increase the cost of mortgage payments and could contribute to declines in house prices. If so, we can expect the Bank of Canada to be very cautious about further raising rates.|