Economic indicators paint a stark contrast to the Liberal government’s rosy assessment
Canada remains a chronic underachiever. Our economy contracted by 1.06 per cent quarter-over-quarter in the third quarter, while the United States economy grew by 5.2 per cent. The European Union and Australia also saw modest economic growth.
We may not technically be in a recession yet, but the picture isn’t looking good, according to Bank of Montreal economist Doug Porter.
“Whatever label you slap on this economy, it’s basically not growing, despite the artificial sweetener of rapid population growth,” he told CBC News. “The big picture is that the Canadian economy is struggling to grow, yet managing to just keep its head above recession waters.”
The question is: how does a country with so much potential and a massive resource endowment end up lagging behind its peers? The answer is simple: Canada’s federal government is run by economic neophytes.
On Nov. 21, Finance Minister Chrystia Freeland boasted that, “Canada is now a global investment destination of choice … and the IMF projects Canada to likewise see the strongest economic growth in the G7 next year.”
But the most recent IMF projection is that U.S. GDP will increase by 2.1 per cent in 2023, but Canada’s will only grow by 1.3 per cent.
As for being the “investment destination of choice,” the figures show otherwise. Net foreign direct investment (FDI) plummeted throughout much of the Liberals’ first term. According to figures from the World Population Review, last year, the U.S. led the world, with net FDI inflows of $388 billion, followed by China ($180 billion), Singapore ($141 billion), Hong Kong ($121 billion), France ($105 billion), Brazil ($92 billion), Australia ($67 billion) and Canada ($54 billion).
Canada’s economic prospects are not so rosy, either. In its summary of an IMF report released over the summer, the Fraser Institute noted: “Expanding the population and workforce does increase the size of the economy, but the IMF observes that it’s ‘not a recipe for growing per capita income or living standards.’ And the data show that this is where Canada has been failing short; prosperity on a per-person basis has been stagnant since the mid-2010s.…
“As for Canada’s investment climate, the IMF suggests it has deteriorated relative to comparator jurisdictions. As evidence, the report cites the fact that gross fixed capital formation (a broad measure of investment) puts Canada in the bottom quartile among the 38 countries that are members of the OECD.…
“To explain sluggish Canadian investment, the IMF highlights insufficient product market competition, restrictions on foreign direct investment and government-fostered policy uncertainty that’s hindering new investment in the mining and energy sectors in particular.…
“Since 2017, Canada has lost almost all the business tax advantages it previously enjoyed vis-à-vis the United States, a development that undeniably has made the country a less attractive place to deploy capital than it was a decade ago.”
In 2022, Canada’s “Household debt, loans and debt securities” as a proportion of the country’s GDP was the highest in the G7. Canada’s indebtedness was equivalent to 102 per cent of its GDP; the United Kingdom was 83 cent; the U.S. was 74 per cent; Germany was 55 per cent; Italy 42 per cent; France 66 per cent; and Japan was 68 per cent.
The second metric is Canada’s excessive price-to-income ratio, or the median price paid for property compared to average disposable income. In the middle of this year, Canada’s ratio was 9.6, more than double the U.S. ratio of 4.2.
On top of this, excessive government deficits (federal and provincial) hobble Canada’s economy with debt and interest payments. This was foreseen in 2021 when the OECD predicted that Canada will be the worst performing economy for the next decade, and for three decades after that.
Numbers matter.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
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The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
The Canadian Press. All rights reserved.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
The Canadian Press. All rights reserved.
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