World Economy

Canada Growth Slowest in 60 Years

Canada Growth Slowest in 60 YearsCanada Growth Slowest in 60 Years

Canada is in the midst of one of its weakest expansions ever, and only the housing boom keeps it from getting worse.

That’s one of the key takeaways from Friday’s GDP report. Two years since oil prices started plunging, Canada’s economy is almost completely reliant for growth on bank lending and the hot Vancouver and Toronto housing markets generating fees for brokers, Bloomberg reported.

Real estate and financial services now account for 20% of the economy, levels not seen in the data since the early 1960s. That could be a problem, with household debt at a record and policy makers scrambling to slow price gains that are making homes unaffordable for all but the wealthiest buyers.

While Bank of Canada policy makers expect a sharp second-half rebound as oil production resumes and exports pick up, some investors are hedging their bets. Swaps trading suggests an almost 30% chance Governor Stephen Poloz will cut interest rates by the October meeting to give the economy another jolt.

At the very least, the economy’s lethargy will add urgency to efforts by Prime Minister Justin Trudeau and Finance Minister Bill Morneau to bolster long-term growth ahead of the 2017 budget.

In its economic outlook report for summer 2016, National Bank announced that it is adjusting its growth forecasts for Canada’s GDP. It forecasts real GDP growth of -1.5% quarter-over-quarter for Q2 of 2016. Forecasts for Q3 and Q4 are better, with predicted real GDP growth at 3.0% and 2.1% respectively. “Economic growth should bounce back in Q3 thanks to clean-up and rebuilding efforts and as oil production recovers,” it explains.