The Bank of Canada writes in its January edition of the "Monetary Policy Report" "...that, to date, the adjustments mean that near-term potential outpout growth is likely in the lower part of the range of estimates provided in the April 2015 Report." (page 29). The lower limit of these estimates for 2016 was at 1.4% last April. The January Report also signals that "...the degree of slack in the economy has been increasing" (page 18).
Now, the question is: in these circumstances, can the Bank projection of a 1.4% real GDP growth this year stand? Isn't it too optimistic?
Many leading indicators of the canadian economy evolution let believe that there could be a downturn in the coming months (see the graphs below). Moreover, the federal government economic stimulus plan is still to come, and an important part of it, the infrastructure investment program, when announced, will take many months before having an impact , because of normal delays for the approval and the beginning of the construction of specific projects.
Be it the real GDP growth forecast for 2016 of the Bank (1.4%), of the IMF (1.7%) or The Economist review pool of forecasters (range of 1.2% to 2.3%), don't be surprised if they are revised downward in the coming months. Even an economic activity contraction is quite possible, at least in the first two quarters of this year.
Some leading indicators of the canadian economy evolution
Building permits (source: Statistics Canada)
Housing starts (source: CHMC)
Commodity prices (source: Bank of Canada)
Unfilled manufacturing orders (source: Statistics Canada)
Stock Market: S&P/TSX (source: The Globe and Mail)
No comments:
Post a Comment