Every other Tuesday, we release 5 Minutes for Business, a publication written by Hendrik Brakel, our Senior Director of Economic, Financial and Tax Policy. In these publications, Hendrik briefly describes current issues that affect the Canadian economy and provides insight on what it will mean for Canadians today and the future. In this week’s edition, he looks at the state of the Canadian economy and whether or not Canada is headed for recession.
Canada’s fourth-quarter GDP growth came in at a brisk 2.4%, but considering most of that growth came from inventories, there is cause for concern. A sharp rise in inventory can be caused by businesses stocking up in anticipation of stronger sales in the future or, alternatively, if a sharp deterioration in demand leaves unwanted stock. We fear the latter.
There are three reasons we’re expecting a significant slowdown in Canada: (1) the big declines in the energy sector’s capital expenditures have not yet been seen in the broader economy; (2) consumption looks soft as retail sales fell by 1.7% in January; and (3) while there is good news in manufacturing, it’s not enough to offset the oil and gas sector, which accounts for 24% of Canadian exports and has seen prices fall by half.
Overall GDP growth should come in around 1.8% this year, and Canadian businesses will have to focus more than ever on exports if they want to continue to grow.
Read 5 Minutes for Business.
For more information, please contact Hendrik Brakel.