The Canadian economy is showing strength in employment, housing starts and a rebound in energy investment according to the latest RBC Economic Outlook report.
The following are the highlights of the report (March 10, 2017):
RBC Economics expects real gross domestic product (GDP) to grow by 2.0 per cent in 2017, followed by a slightly firmer 2.1 per cent in 2018.
Consumers will continue to support growth in 2017.
Canadian exports are projected to accelerate slightly following a subpar performance in 2016.
Federal government spending on infrastructure projects will provide more significant support in 2017 and this activity is expected to add almost half a percentage point to the national growth rate.
A slowdown in real estate activity is likely to weigh down growth, as lack of affordability and legislative changes cool some overheated urban housing markets.
The U.S. dollar is likely to appreciate against most major currencies as the Federal Reserve raises rates through the year.
RBC forecasts the Canadian dollar will end 2017 lower at 72.5 U.S. cents.
Stronger-than-expected U.S. economic data will likely prompt the Fed to increase its policy rate by 25 basis points this month, and a further 50 basis points later in 2017. The Bank of Canada is expected to start tightening in 2018, which will stabilize the interest rate differential next year.
Ontario is expected to lead the way for the first time since 2000, with a growth rate of 2.5 per cent.
Finance Minister Bill Morneau announced that the Government’s federal budget will be tabled on March 22, 2017. According to the the Department of Finance, “Budget 2017 will continue the Government’s focus on the middle class and those working hard to join it.” No further details were provided by Morneau.