Briefing highlights
- Soon in Canada: The year of living modestly
- Inflation slows in Canada
- Brookfield in $5.2-billion deal
Living more modestly
We’ve heard a lot this week about rich cars and richer houses, but Canadians appear headed for a year or two of living more modestly.
Consumers will spend more modestly, and the economy will expand only modestly, Toronto-Dominion Bank economists warn in a new forecast.
“In the past year, both consumer spending and household debt accumulation has continued to run ahead of overall economic activity,” said TD chief economist Beata Caranci.
“This is an unsustainable trend that we do not foresee continuing in 2017-18, especially in light of our expectation of softening housing trends.”
Consumers have so far this year been “surprisingly resilient,” continuing to bolster the economy, helped along by the federal government’s new Canada Child Benefit.
But several factors are going to change that, the TD outlook said, and “ultimately spending growth will be constrained to a sub-par rate.”
Those factors include a cooling housing market and swollen consumer debt levels. Vancouver home prices, for example, are forecast to decline by 10 per cent or more.
Canada’s economy has limped along, expanding by just 0.5 per cent over the last 18 months.
TD now sees “green shoots” that suggest a rebound, with a strong showing expected in the quarter that’s just ending. And consumers will still play a role, though a weaker one.
But don’t be fooled by a one-quarter growth spurt.
“Canadians shouldn’t be misled into thinking that this momentum will hold,” the bank said, projecting economic growth of just 1.1 per cent this year, 1.8 per cent next year, and 1.7 per cent in 2018.
Unemployment is forecast to remain high, at 6.9 per cent next year and 6.8 per cent a year later.
The rise in personal disposable income, meanwhile, will slow gradually.
“As long as U.S. growth improves as expected and the Federal Reserve continues to slowly raise interest rates, medium and longer-term rates are likely to edge up in Canada,” the report said.
“This should help to slow the housing market, while the widening U.S.-Canada interest rate differentials put downward pressure on the Canadian dollar over the remainder of 2016,” it added.
“This depreciation, together with accommodative monetary policy, will support the rotation story. Here’s hoping for a little help from our friends.”
Inflation slows
Canada’s inflation rate slowed unexpectedly in August, amid lower prices for food and travel, The Globe and Mail’s David Parkinson reports.
Statistics Canada reported that the country’s consumer price index rose 0.1 per cent in August from July, but the year-over-year inflation rate slipped to 1.1 per cent.
The core inflation measure, which excludes the eight most volatile components of CPI (including many food and energy goods), was 1.8 per cent, its lowest reading in more than two years, down from 2.1 per cent in July.
Brookfield takes stake
Brookfield Infrastructure is leading a group in a $5.2-billion (U.S.) deal for a 90-per-cent stake in a unit of Brazil’s Petrobras.
It and several clients of Brookfield Asset Management are involved in taking the stake in Nova Transportadora do Sudeste, which runs a natural gas transmission system in southeast Brazil.
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