The Canadian economy experienced strong growth in 2017, but the pace of growth tapered off toward the end of the year. This slowdown is expected to continue in 2018 with the economy forecast to expand by 1.9 per cent, down from 3.0 per cent in 2017, according to The Conference Board of Canada's latest Canadian Outlook report.
"Rising interest rates, moderating employment growth, and high household debt will force consumers to reduce their pace of spending this year," said Matthew Stewart, Director, National Forecasting, The Conference Board of Canada. "The hope that trade and business investment would pick up the slack is unlikely to come to fruition as uncertainty surrounding NAFTA negotiations and the possibility of increased tariffs are challenging businesses and exporters alike."
Tighter labour markets
The report says tighter labour markets and increased retirements from baby boomers will lead to much slower employment growth in 2018. Job gains are expected to slow to 232,000 jobs, down from 336,900 last year.
A variety of factors point to further housing market cooling in 2018, says the Conference Board. Topping the list is the imposition of a new "stress test" imposed on mortgage borrowers by federal regulators. This reduces the maximum mortgage for which borrowers can qualify for, and it will reduce housing demand, particularly for higher-priced units.