Economic Update 2013

Downtrend in Canadian household sector

As a Calgary mortgage broker we have come to see that we can not be painted with the same brush.  However this is the country as a whole in which we are an important part.  

As the Canadian household sector slows down; the economy faces challenges through a downtrend in existing home sales.  Currently, Canada looks to improve the growth of the economy with exports.  Residential construction is expected to put forth a small drag on overall economic activity over the next few years.  Despite the recent rebound in construction, growth for the first half of 2013 is expected to remain modest, and gradually increase in the second half of 2013.  The unemployment rate hit a four-year low of 7.0% this month; the improvement came from a large drop in the labour force, the largest decline posted since April 1995.  The result of a quick decline in job starts is believed to have been because of an unsustainable pace of construction in 2012.   

Decreased demand in the U.S. 

The moderate growth environment surrounding the U.S. has shown reports of a decreased demand for Canadian manufactured goods.  Canadian manufacturers should benefit from a small improvement in Canadian exports in early 2013 from the slowdown seen in the second half of 2012.  We continue to expect strong U.S. growth in the second half of 2013 to improve Canada’s export picture.  The U.S. tax deal signed by Congress in early January brought two new tax increases.  The drag on income will lead to a continued deceleration in spending growth in the months ahead.  We expect real consumer spending to rise by 1.4% in the first quarter of 2013.  As the tax hikes impact vanishes, consumer spending growth will be sustained by job growth, allowing growth to increase to 2.4% in the second half of this year.

Economic growth sees different drivers

The Canadian trade sector is currently facing significant challenges from a strong Canadian dollar and particular constraints are pushing prices lower.  For 2013, markets are anticipated to receive much less of a lift from central bank actions.  This proposes that asset prices will likely be closely related to economic conditions.  There is an optimistic outlook for most economies over the course of the year.  The Canadian economy is expected to be pushed by different drivers in 2013.  Economic growth will be driven by the export and business sector and less so by residential construction and consumer spending.
 
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