PETER ANDERSEN MONTHLY ECONOMIC REPORT SUMMARY – OCTOBER 2017

By: TEC Canada

Nov 1, 2017

Global economic growth is strengthening across the board and the current business cycle may continue into the next decade. Canada’s economy, heavily weighted on exports, will directly benefit from this growth. Higher commodity prices (copper, lumber, oil) will boost the CAD and non-commodity exports are also expected to increase. The export categories include machinery and equipment, plastics, rubber products, food and beverage, and service exports such as transportation, travel and tourism. Canada is expected to be a G-7 growth leader again next year, with a projected real GDP increase of 2-1/4 percent in 2018. The world oil price has been moving higher this fall, with Brent crude (our favoured global benchmark) up to $60 a barrel. Chinese oil demand and support from Russia and Saudi Arabia for extending oil output restraint could lead to a surprising rebound in 2018.

Job growth has accelerated in Canada this year, with an increase of 2.4 percent in the last 12 months. Ontario and B.C. lead the way, with Alberta lagging everywhere except for Calgary. The largest percentage increases in payroll employment are construction, professional, scientific and technical services, accommodation and food services, and manufacturing — the hottest sectors of Canada’s economy. The supply of available workers is dwindling and a shift is underway from part-time to full-time jobs. The unemployment rate has declined to 6.2 percent as measured by Statistics Canada. Housing activity in Canada is at its cycle peak but new mortgage underwriting rules will reduce both demand and average house prices in 2018. The Canada Mortgage and Housing Corporation warns of overbuilding in Calgary and Edmonton. Only B.C. and Newfoundland show year-to-date declines in total housing starts. The housing markets in Toronto, Hamilton, Vancouver and Victoria appear to be highly vulnerable to a downturn.

Indicators show a better than expected U.S. economy, with a third quarter annualized growth of 3 percent for real GDP and healthy 2018 growth momentum, without overheating of wages or prices – with or without tax cuts. Business spending on capital goods and machinery — a leading indicator of business investment— is growing. Third quarter growth was not as affected by Hurricanes Harvey and Irma as expected and unemployment is the lowest since the early 2000s. U.S. housing construction is not contributing to GDP growth but confidence was up in September, with residential renovation and sales of single family homes trending up and hurricane flooding increasing the demand for flooring, wallboard and finishing carpenters.


Resources:

OECD predicts Canada's economic growth to be best in G7
China's oil demand is growing at more than double last year's pace
Canada's housing market rebound seen in mid-2018 as sales rise for second month in a row


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