OTTAWA, ON (September 13, 2018): With persistent uncertainty plaguing business investment and consumer confidence, economic growth in Canada has been sputtering. Now, to make matters worse, the federal government is facing new economic challenges including faltering infrastructure spending, ongoing NAFTA disputes with the US, and the court ruling which has blocked the Trans Mountain Pipeline.
According to Munk Senior Fellow Philip Cross, author of the Macdonald-Laurier Institute’s latest Quarterly Economic Report, these factors have led to persistently slow growth despite major government efforts.
“Firms are hesitant to commit to long-term investments in Canada without assured access to the US market,” said Cross, who adds that signs are pointing to “slow growth at best in the second half of the year.”
Although GDP growth in Canada picked up slightly to 0.7 percent in the second quarter of 2018, this growth was linked to higher commodity and stock prices. Other factors, such as a declining housing index, less favourable labour market conditions, and trade uncertainty all point to a disappointing end to the year.
Once again, business investment into Canada remains unusually poor. Cross identifies this aspect as “the most disappointing feature of the GDP report,” further explaining that “business investment rose by only 0.4 percent – its slowest quarterly gain in over a year.”
“The deceleration of business investment in Canada occurred despite a strengthening of energy prices, which should have favoured more spending by Canada’s largest investment sector. The continuing lethargy of investment in Canada also stands in marked contrast with improving investment in the US.”
The subtext to Canada’s lacklustre economic performance is the failure of major government efforts to stimulate the economy.
Provincial minimum wage hikes have failed to produce increased household incomes. Infrastructure spending – a major priority of the federal government – has fallen well short of the promised boom, and much of the increase in infrastructure spending has been offset by lower spending by the provinces.
To learn more, read Cross’ full quarterly economic report on why Major Government Efforts to Stimulate the Economy Have Failed.
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Philip Cross is a Munk Senior Fellow with the Macdonald-Laurier Institute. He previously served as the Chief Economic Analyst for Statistics Canada, part of a 36-year career with the agency.
Cross’s Quarterly Economic Reports provide analysis of the latest economic data and results of the Macdonald-Laurier Institute’s Leading Economic Indicator, designed to signal an upcoming turn in the business cycle, either from growth to recession or from recession to recovery, six months in advance.
The Macdonald-Laurier Institute is the only non-partisan, independent national public policy think tank in Ottawa focusing on the full range of issues that fall under the jurisdiction of the federal government.