Canada’s recent mediocre economic performance should get a boost by next year thanks to a strengthening U.S. economy, according to a study by the Conference Board of Canada.
In its spring 2013 Canadian Outlook report, the Conference Board says a slow housing market, lowering commodity prices, and government spending restraints are taking a toll on Canada’s domestic economy this year.
GDP growth is expected at a modest 1.8 percent in 2013, according to the report, and Ottawa as well as most provincial governments are tightening spending even further in their latest budgets to reduce deficits.
“Overall, Canada’s domestic economy is not expected to muster enough strength to get growth in real gross domestic product above two percent this year,” Pedro Antunes, director of national and provincial forecast at the Board, said in a statement.
However, when compared to other developed countries, Canada’s economic performance in 2012 and 2013 isn’t all that disappointing, the report says. Canada’s business investment exceeded its pre-recession peak in 2012, and employment and real wages continue to increase, while trade is also improving.
What’s more, the strong growth in the U.S. economy is expected to grow Canada’s GDP in 2014 to 2.5 percent.
“[T]he stronger pace of U.S. growth expected in 2014 should help to lift spirits, resource prices, trade prospects, and income here at home,” Antunes said.
The report says real estate sales activity and construction this year is softening because of the federal government’s tightening of mortgage rules, which should help rebalance the market and stop decline in real estate values. The national average of home prices is expected to fall by 2.5 percent this year and stay flat throughout next year.
The Conference Board is expecting very little growth in the public sector until at least 2016 due to government spending cuts.