Canadian 2018 export review
According to World’s Top Exports, a global trade aggregate website, from January – September 2018, Canadian exported goods were on track for an annualized $449.8 billion– representing a 6.9% year-over-year gain from 2017. Canada’s exports now represent 31.4% of total economic output.
In 2018, 77.4% of exported products were destined for the US & Mexico markets. Meanwhile, Asia purchased 11.5%, Europe accounted for 8.5% and just 0.7% of Canadian exports were sent to Africa. Canada’s top 3 exporting sectors in 2018 were mineral fuels [including oil] (20.1%), vehicles (14.8%), and machinery [including computers] (7.7%).
2019 Canadian GDP growth forecast
The Bank of Canada is projecting 2019 GDP growth to be 1.7%, down from its previous forecast of 2.1% in October. The first quarter of 2019 could make or break for the year ahead with growth is expected to be just 0.8% over the first three months.
Canada’s population grew by 1.4% last year – the largest increase since the early 1990s. Meanwhile, Canada’s three largest cities – GTA, Montreal and Vancouver – account for 35% of GDP. To compare, in the US the top three cities only account for 15% of GDP.
Consumer spending and the housing sectors continue to be the workhorses for the Canadian economy. However, consumer spending is slowing down as spending adjusts to previous interest-rate hikes and tighter mortgage rules. The Bank of Canada’s key interest rate holds steady at 1.75% after being raised three times in the previous calendar year.
A decline in global oil prices has had a substantial impact on Canada’s GDP growth prospects. The Bank of Canada estimates the oil slump, which began last summer and has seen a slight recovery in recent weeks, is projected to reduce Canada’s GDP growth by 0.5% by the end of 2020.
US & global growth considerations
“Last year growth numbers in the US were good, coming in just under 3%. This year, US growth is estimated at 2.4%, even allowing for the hit from the government shutdown.” predicts Craig Wright, Chief Economist for Royal Bank of Canada at a recent Economic Club of Canada event sponsored by CPA Ontario.
“It’s not surprising that the recession debate has surfaced. The U.S. economy is in its tenth year of expansion. The closer you get to the end of expansion the odds of recession start to move higher.” Wright continues.
Consumers drive 70% of the US economy and with US unemployment at a low 4%, they will continue to account for considerable US growth in for the year ahead.
China’s growth is projected to decelerate to around 6% this year and Europe’s growth is projected to slow as well. Brexit is an ongoing concern for the global economy given that London is a major global financial centre.
The trade war between the US and China is considered the single trade largest risk facing the global economy. This conflict may eventually resolve itself with both sides taking a step back, however, if the trade war intensifies, the Canadian and global economy is a likely proxy target for the ongoing political chess match. As such, the newly-minted USMCA could quickly become a political pawn between Canada and the US, ultimately casting shade on the Canadian economy in 2019.