The Canadian economy has been improving, as well as employment trends despite general pessimism towards the economy’s future, says the “Canada Market Perspective” in Russell Investments’ Global Market Outlook – Q2 Update, released March 29. This has led to the rise in domestic equities since 2016.
"Not to spoil the party, but we believe that although recession probabilities are low, vulnerabilities exist which should not be ignored," said Shailesh Kshatriya, director, Canadian strategies at Russell Investments Canada. "Specifically, the consumer has been the most consistent contributor to growth over the last several years, despite rising household indebtedness. Consumer indulgence may go on a bit longer as housing continues to defy rationality. However, at some point debt-to-disposable income levels, which are now approaching 170%, will become self-limiting."
More business investment needed
Since the downturn in oil prices in 2014, for eight consecutive quarters, business investment has detracted from growth. "We would prefer to see consumers pass the baton to businesses, which need to start spending," Kshatriya added. "Although business surveys point toward improvement on this front, we await data that is more measurable."
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