…despite ongoing weakness in Canada’s energy sector.
September 22, 2015
by ASSOCIATED PRESS
TORONTO — Ongoing weakness in the energy sector has prompted RBC Economics to downgrade its latest forecast for the Canadian economy.
It says Canada’s real GDP is projected to grow 1.2% this year – down from its June prediction of 1.8% growth. RBC also predicts 2.2% growth in 2016 – 0.4% below its earlier predictions.
However, RBC says while the economy contracted mildly in both the first and second quarters of 2015, the depth of the decline was marginal and the weakness was concentrated mostly in the energy sector.
RBC says it expects positive economic activity outside of the energy sector to offset momentum lost in the first half of the year.
Provincial economies continue to be divided between oil producers and oil consumers, with the fallout from plunging oil prices significantly lowering the outlook for economic activity in Newfoundland and Labrador, Alberta and Saskatchewan.
RBC says the prospects for Ontario, BC, Quebec are brighter, as well as for most of the other oil-consuming provinces, although the expected liftoff in growth generally has been delayed.
“The recent softening in the Canadian economy caused a flurry of recession talk, which we believe to be misplaced,” said RBC senior vice-president and chief economist Craig Wright.
“Not only did the June GDP gain of 0.5% point to positive growth leading into the third quarter, a more compelling argument is the steadfast strength in Canada’s labour market.”
Despite the unemployment rate inching up to seven per cent in August from a consecutive six-month reading of 6.8 per cent, RBC notes the labour market continued to generate about 14,000 new jobs per month in 2015.
RBC’s Outlook also showed an uptick in consumer spending in Canada in the second quarter of 2015, resulting from increased purchases of durable goods, including autos.
“Canadians continued to take advantage of low borrowing costs during the first half of 2015, with household debt balances rising at the quickest pace in more than two years,” Wright added.
“That said, historically low interest rates and, to a lesser extent, sustained income gains have kept the costs to service these debt balances at a record low.”
© 2015 The Canadian Press