Were the experts right in their predictions For their 2019 forecasts
We posted the economic forecasts for the year in our January posting and its time to look after 6 months to see if these predictions from the experts were true.
January Posting Forecast Excerpt:
“The BDC estimates the Canadian economy will grow by 2% in 2019 with employment at full capacity. The National Bank has a more cautious forecast of 1.8% in 2019 as the oil patch has record inventories with low prices and lower consumer spending. Deloitte Canada has the same cautious approach and states.“Consumption-led growth in Canada is coming to an end, cooling economic growth to a sustainable pace, but headwinds loom”. Deloitte Canada says after a growth rate of 3% in 2017 the pace of economic growth in Canada is projected to slow to slightly below 2.0 percent in 2019 and drop to 1.4 percent in 2020. Canada’s GNP in 2017 was $1.679 trillion USD and 2% growth is worth $34 Billion still a sizeable number.
The 6 month review ? What has happened? Here are the facts from Statistics Canada
- Canada’s economy grew by a greater-than-expected 0.3 per cent in April, the second strong performance in a row, suggesting a recent slowdown is ending according to Statistics Canada.
- Unemployment is at 5.4 per cent, the lowest level since 1976. Canada needs workers. A June 25 report showed the country’s farm labour shortage is costing billions and is expected to balloon in the next decade.
- Nine of 11 sectors tracked by Statistics Canada recorded an increase in exports, led by a 12.4 per cent jump in motor vehicle production. Another big contribution came from the aircraft sector, which was up 33 per cent in the month.
- Shipments of energy products rose 5 per cent in May, driven by crude oil and a surge in exports of refined products. The gains were driven by rebounding oil output that is returning the nation’s economy to a more solid footing.
- The export gain in May comes on the heels of other strong gains, bringing the increase in merchandise shipments to 15 per cent since December. That’s the biggest five-month gain in Canadian exports since 2008.
So were the Experts right? The USA is still the Economic Engine
The first quarter this year saw a 0.4% growth as predicted, but nobody predicted that we will see the large gains in the second quarter in some industry sectors not seen in 10 years. What is the root cause of this development, of course it is the USA economy that has seen 10 years of growth and a protective attitude to domestic companies, which means good news for Canadian companies exporting to the USA ( we are still a branch plant economy of the USA). USA unemployment is at 3.6% and the Canadian dollar is relatively cheap hovering around a 30% exchange.
We should temper our enthusiasm with this good news as the third quarter has lower business activity in the summer, but the rest of the year should be more optimistic than the beginning of the year. One side effect of the robust economy are severe housing shortages driven by immigration and in-country migration that has driven the cost of shelter to unaffordable levels as building activity has not matched population growth, especially in Toronto that gets 100,000 new people each year and needs at least 25,000 new homes. Sustainable economic growth requires a housing strategy that allows for an increase housing supply as workers need a place to live.
The Chinese Fortune that was also included in the January posting was “This year is the year of the Pig in the Chinese Lunar calendar (February 5) 2019 is a great year to make money and a good year to invest. ” It looks this fortune may come true this year, and the economic experts were almost right as they did not predict a rebound in the second quarter.