Accelerated layoffs in the sector and oil's further plunge
put more downward pressure on Canadian GDP
TORONTO, Jan. 28, 2016 /CNW/ - Anemic job growth, trouble
in the oil patch and a fragile resource sector have led to a winter
of discontent for the Canadian economy, as this year's real GDP
growth is likely to come in at 1.3 per cent according to a revised
economic forecast from CIBC World Markets.
The downgraded outlook for Canada's exposed economy points to more pain
for an already strained labour market, even after factoring in an
additional $10 billion in stimulus
spending, a $30 billion federal
deficit and a slightly weaker track for the Canadian dollar.
"While the country's GDP is less heavily weighted to resource
sector spending than it was a year ago, we're only in the early
stages of the negative spillover effects on other sectors," says
Avery Shenfeld, Chief Economist, at
CIBC, in the report Economic Insights: The Winter of our
Discontent. "What's added to the downdraft on Canada, and on asset markets, is the
discontent in investor sentiment globally including a sharp retreat
in equities, rising corporate and provincial bond spreads, a
flatter U.S. Treasuries curve, and a build-up of cash in Canadian
households."
Looking beyond the very near future, Mr. Shenfeld says there are
good reasons not to "overdose on pessimism", led by continued
growth in the U.S. "You don't get the hiring of hundreds of
thousands of new workers without a degree of optimism among
employers, and the U.S. shrugged off a similar malaise in factory
output and exports during the Asian crisis of 1998."
While official growth in China
continues to decelerate he believes that economy could surprise to
the upside while other emerging markets should see an upturn this
year. Paired with added modest acceleration in Europe, these trends can point to an overall
improvement in global growth in 2017.
He also expects commodities prices to rebound, albeit modestly,
in 2016. "With supply finally starting to fall off in some areas,
modest price recoveries should be in the cards as the market eyes
brighter days in 2017."
While a more balanced view of the world should appear in the
coming months, Canada's economy
will continue to be sluggish, but as Mr. Shenfeld notes,
"markets price out the possibility of another rate cut and oil
prices start to recover in the second half of the year, we look for
the Canadian dollar to recover to 75
cents by year-end."
The complete CIBC World Markets report is available at:
http://research.cibcwm.com/economic_public/download/eijan16.pdf
About CIBC
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SOURCE CIBC World Markets