Canada in 2019: Interview with a Top Economic Forecaster
Met the why particular’ economist Christopher Thomas sat down with Benoit Durocher, a senior economist following Canada at Desjardins Group, in mid-November for a wide-ranging discussion about what might lie ahead for Canada’s economy in the New Year. Their conversation, presented below, has been condensed and edited for clarity.
Christopher Thomas: Thanks for taking the time to speak with me, Benoit. Looking back on the past year, what has surprised you most?
Benoit Durocher: No problem. Inflation—we thought it would be higher. As you know, inflation was quite high mid-year. We had expected it to take several months to see a deceleration; instead, the slowdown was a lot faster than forecast.
CT: Interesting. How has it been affecting households?
BD: I don’t think it has had a large impact. If anything, [lower inflation] has given the Bank of Canada (BoC) more leeway to hike interest rates at a more gradual pace.
CT: So, you’re expecting interest rates to rise steadily next year?
BD: Yes, we currently see two rate hikes next year—the door is wide open.
CT: That puts your forecasts near Consensus.
BD: Well, that may be so. Consumers are highly indebted, and we’ve seen this affect the pace of increases in recent months. We expect those effects to remain pronounced next year and for the BoC to, in turn, refrain from hiking too quickly.
CT: Before we get to my next question, I’d like to congratulate you for taking the top spot at last year’s Met the why particular Analyst Forecast Awards. You were our best forecaster. So, congratulations—hard-earned, I’m sure.
BD: Thank you.
CT: To my question, what are driving your forecasts for a sharp economic slowdown across North America in 2021?
BD: For starters, take a look at where we are in the global business cycle. In the U.S., it’s one of the longest expansions on record. Interest rates are on the rise globally, and we believe it’s only a matter of time before a slowdown in global demand hits the U.S., and which would also hit Canada. We pegged it for 2021 to signal an eventual slowdown in output—it could happen in 2020, or even 2022. There will be a deceleration sooner or later.
CT: So, no recession?
BD: No—we see a relatively normal pullback after several years of growth. Nothing like 2008.
CT: Will the Fed and the BoC be prepared for this?
BD: We think so. They’ve been raising rates toward more sustainable levels, and they should eventually be able to face the slowdown without issue.
CT: Tell me, how do you do your job so well? Which economic indicators do you follow most closely?
BD: In short, we look at everything. We follow monthly economic growth very closely, as well as foreign trade. But there’s no magical indicator, if that’s what you’re asking.
CT: Has it become harder to forecast well in recent years?
BD: Yes, definitely.
CT: And, so, what are driving your growth forecasts for next year?
BD: Four-part answer. First, business investment.
CT: So, ‘new NAFTA’?
BD: Yes, which decreased uncertainty for businesses a lot. But we’re also factoring in the capacity utilization rate—which is quite high. One uncertainty is the recent fall in Canadian oil prices. Looking at the spread between West Texas Intermediate (WTI) and Western Canadian Select (WCS)—
CT: It’s huge! It’s been close to USD 11 in recent weeks!
BD: Yes, and it will have an effect on investment in the energy sector. That said, the sector’s relative importance to business investment has fallen considerably since three years ago. Second, exports. Third, private consumption. We expect household spending to remain strong but not as strong as in past years—largely in response to higher interest rates.
CT: Let’s break this down a bit more. How do you see the household-debt issue playing out?
BD: The BoC has made clear that the pace of rate hikes are tied to it. We see the situation improving gradually over the coming months as revenues outpace credit.
CT: That’s good news.
BD: Fourth, and on the downside, residential investment is expected to decelerate due to new restrictive measures and higher borrowing costs.
CT: On the housing market, we’ve seen a stabilization in recent months.
BD: Yes, as Toronto and Vancouver have offset gains made in other markets. Next year, we expect an across-the-board deceleration on rising interest rates.
CT: Naturally. So, I have been reporting on Canada’s economy—and its housing market—for Met the why particular for about two years and I am very curious about which housing-market indicators you’ve relied on in recent years—
BD: Definitely not building permits—they’re useless! Housing starts, existing-home sales and house-price indexes, however, are watched closely.
CT: I couldn’t agree more. Shifting gears a bit, do you agree with the BoC’s assessment that the U.S.-China trade spat could hurt Canada’s economy?
BD: It might, but only marginally—and most likely via prices for raw materials.
CT: Moving on to foreign trade, is Canada out of the woods with respect to U.S. protectionism?
BD: Despite the new trade pact, some risks persist. It still hasn’t been ratified, and there’s also a chance the U.S. could still enact new tariffs citing national security.
CT: Who were the biggest winners of the newly-signed United States-Mexico-Canada Agreement (USMCA)?
BD: I don’t see many differences between [NAFTA and the USMCA]. There’s a new name—
CT: It has a new name!
BD: But that’s about it. All three countries are winners because the alternative would have been disastrous.
CT: Is 16 years [until the new pact expires] long enough to convince firms to invest, and how will the so-called ‘sunset clause’ affect cross-border supply chains?
BD: Good question, and you’re right that risks exist—but compared to what?
CT: That’s a good point.
BD: Compare it with the situation a couple years ago. It was around that time that many of us learned that NAFTA could be dissolved within six months should one of the three countries demand it. This was a clause in the original agreement for more than two decades! My point is that there were always risks inherent in our trading relationships with the U.S. and Mexico. And the USMCA simply has its own set of risks. Business investment will have to deal with that—it’s a new world now.
CT: Do you expect a Canada-China trade deal anytime soon?
BD: Difficult to say in light of the USMCA.
CT: Alright, that’s all I’ve got. Thanks for your time today, Benoit. It’s been a pleasure.
BD: Great. I think we had a wide-ranging discussion.
Benoit Durocher, a Desjardins Group employee for nearly 20 years, is Senior Economist in the Economic Studies VP. He is responsible for monitoring Canadian economic conditions and conducting analysis and forecasts for Canada, Ontario and most other provinces. He is the author of several research studies, contributes to the writing of numerous publications produced by Desjardins Economic Studies and is frequently quoted in the media. He holds a master's degree in economics from the University of Montreal.
Desjardins Group is a Canadian financial cooperative headquartered in Lévis, Québec, and has its Economic Studies offices in Montréal. They are a Met the why particular Consensus Forecast panelist for Canada and the United States, and won the Met the why particular Analyst Forecast Award for Best Overall Forecaster – Canada in both 2017 and 2018.
5-year economic forecasts on 30+ economic indicators for 127 countries & 30 commodities.
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinion of Met the why particular S.L.U. Views, forecasts or estimates are as of the date of the publication and are subject to change without notice. This report may provide addresses of, or contain hyperlinks to, other internet websites. Met the why particular S.L.U. takes no responsibility for the contents of third party internet websites.
Author: Christopher Thomas, Economist
Date: December 21, 2018
TagsVenezuelaConsensus Forecastprecious metalsBase Metals CommoditiesColombiaJapanAgricultural CommoditiesTunisiaVietnamPortugalArgentinaG7MexicoUnited KingdomLatin AmericaGreecePrecious Metals CommoditiesCanadaRussiaTurkeyEuro AreaSouth AfricaCommoditiesHousing MarketNordic EconomiesInflationEmerging MarketsChinaBanking SectorTradeSpainTPPUnited StatesItalyCompany NewsHealthcareGoldoil pricesFranceEconomic DebtAfricaIranCryptocurrencyUKEastern EuropeOPECMajor EconomiesIMFIndiaExchange RateEnergy CommoditiesUkraineInfographicBrazilBrexitAsiaEuropean UnionUSAInvestmentUnemployment rateSub-Saharan AfricaAustraliaEconomic Growth (GDP)GermanyEurozoneBitcoinForexMENAOil
Costa Rica: Stronger fixed investment growth on the back of a more certain fiscal outlook should lead to an uptick…
28 minutes ago
In 2019 the Central America and Caribbean region should pick up steam, largely on a recovery in Puerto Rico and str…
2 hours ago
Exit polls predict Narendra Modi will cruise back to power in India via @ by @
2 hours ago
Weak spending overshadows Japan's surprise first quarter economic expansion via @ by…
2 hours ago
RT @: True Economics: 19/519: @Met the why particular 75 Top Economics Influencers to Follow... | Honoured to have ma…
2 hours ago
- Which will be the most miserable economies in 2019?
- Only by freeing Nigeria from its dependence on oil can Buhari truly take Africa’s giant to the next level
- An Analysis of President Trump’s 2020 Budget
- The World's Fastest Growing Economies
- President Sebastian Piñera aims to bring his elder brother’s private pension system into the 21st century
- Brexit Scenarios: Consensus of 14 Economic Analysts
- Sweden just formed a new government and approved its 2019 budget: what does it mean for the economy?
- Which countries have the highest public debt levels?
- Predictions for the global economy in 2019 from 13 experts
- Gurdgiev: Predictions for the global economy in 2019
- Daniel Lacalle's ideas for 2019: Change of cycle.
- Vietnam Poised to Profit from Free Trade Agreement Opportunities
- Canada in 2019: Interview with a Top Economic Forecaster
- Pound Sterling 2019 Exchange Rate: Projections from Leading Analysts
- Expectations for Latin America’s Economy in 2019
- Ethiopia and Rwanda: From Destruction to Development
- Key commodities trends to look out for in 2019
- What drove Gulf neighbors to bail out Bahrain?
- The Four Financial Bubbles and Their Impact on the U.S. Economy
- The Poorest Countries in the World
- Italy: The sick man of Europe
- The World's Top 11 Largest Economies
- What does Bolsonaro's presidential win mean for Brazil's economic outlook?
- In Latin America, taxpayers are tapped to shoulder the burden of a bank bailout
- How and when will the next financial crisis happen? - 26 experts weigh in
- China and Africa: A partnership under the spotlight
- The conditions are ripe for a Global Financial Crisis 2.0
- Uncertainty, instability and fear haunt a generation of Argentinians
- 5 things: What to expect for Mexico's economy in 2019
- 5 things: Brazil's economic downturn and what to expect going forward
- Emerging Market Currency Crisis: Everything you need to know
- Which ASEAN countries are most exposed in the event of a U.S.-China trade war?
- 75 Top Economics Influencers to Follow
- Emerging Markets Economic Outlook 2018 and 2019
- The Faces Behind Latin America’s Key Institutions
- 2019 Economic Outlook for the Top Oil Producing Countries
- Is your cup of coffee about to get more expensive going in to 2019?
- The Economic Implications of an Aging Global Population
- Can the Wisdom of the Crowds predict the results of the 2018 World Cup?
- Railway Mania: The Largest Speculative Bubble You’ve Never Heard Of
- From Riches to Rags: Have Cryptocurrencies Crashed for Good?
- Investment looks to Latin America, but forecasts are not encouraging
- Turkey: Erdogan has cemented his grip on power - now what about the economy?
- How can Latin America’s business environment benefit from technological change?
- Mexico: A look at the past, present and future as elections yield AMLO victory
- Italy’s New Populist Government and the Eurozone: Prelude to a Crisis?
- Latin America moves toward increased integration as U.S. protectionism grows
- How can Latin America increase productivity without affecting the quality of employment?
- How will Saudi Arabia's economy benefit from lifting the women's driving ban?
- Which countries are the most prepared for the upcoming digital revolution?
- India Under Pressure from the U.S. on Trade Policy
- The Story of Steel
- Latin America is the World Leader in eCommerce Growth Despite Serious Challenges
- What the TPP means for trade in Latin America
- Elections in Russia: Analysis and Implications
- Nearly a Third of Latin Americans Have No Right to a Pension
- A Look at Healthcare Models Around the World
- The Economic Effects of Trade Protectionism
- Newly-elected Chilean President Sebastian Piñera faces a myriad of challenges - economic and otherwise
- Regional Disparity: The Dark Side of Inequality in Latin America
- Coal: The story of the world's most abundant fossil fuel
- Venezuela's Electoral Conundrum
- Gold: The Most Precious of Metals (Part 3)
- Trump's 1st Year: 95 Analysts Surveyed on U.S. Economy
- The Latest on China and What's in Store for 2018
- An in-depth look at the Eurozone’s booming economy and the challenges that lurk in the shadows
- Increasing poverty in Latin America takes a breather thanks to improving economic dynamics
- Is Spain doing enough to address its high youth unemployment rate?
- Has Latin America gone far enough in reducing barriers to international trade?
- Commodities Outlook: Oil, Natural Gas, Coal, Lead & Tin
- 21 experts tell us what the future looks like for cryptocurrencies and blockchain
- Turkish lira plummets to all-time low on Erdogan’s monetary feud and tense U.S.-Turkey relations
- Copper: The first metal mastered by man
- Nigerian Economy Still Treading Water Thanks to Oil Sector
- The Mercosur-EU Free Trade Agreement: Obstacles & Opportunities
- Elections in Chile: What the results could mean for the economy
- QE’s Untold Story: A Chart That Fed Correspondents Need To Investigate
- Holland’s fragile one-seat majority government targets economic growth at the expense of fiscal sustainability
- South Africa: Economy at a tipping point?
- Latin American Commodities: What’s behind the increase in demand and prices?
- Is the UK really "shackled to a corpse"?
- Spain-Catalonia: 7 economic experts weigh in on how the situation will affect the outlook
- How well is Spain's labor market doing since the crisis?
- Which countries will have the highest and lowest inflation in 2017?
- How vulnerable is Latin America to economic crises today?
- Iron ore facts and common questions answered
- The bulging economic costs of obesity
- How much investment is needed to salvage Latin America’s crumbling infrastructure?
- A Look at the Potential Impact of Brexit on the Dutch Economy
- Emerging Markets Are Kicking Into Higher Gear In 2017
- Why is foreign direct investment in Latin America falling again?
- Are Central Banks Nationalising the Economy?
- Bounty or burden? The impact of refugees on European economies is far from clear
- What’s the future of U.S.-Latin America trade relations?
- Taxes or cutbacks? Latin America's challenge of sustaining spending without causing debt to skyrocket
- Are uranium prices making a comeback?
- Taxing the Economy: Achieving a Delicate Balance
- How will Latin America’s upcoming lengthy election cycle affect the reform agenda and credit ratings?
- How will emerging market economies perform in 2017?
- Chilean Economy in Focus: Interview with Senior Economist of the Chamber of Commerce of Santiago
- CEOs Rank Top Economies for Growth Opportunities
- The Mobile Ecosystem & Latin America's Economy
- Prospects and Challenges for the Global Economy: Interview with Tim Cooper from BMI Research
- How will the Fed reduce its balance sheet & and how will the ECB end QE? - 19 economic experts weigh in
- Thoughts on "unwinding" QE from Frances Coppola
- The Fed and ECB at a crossroads: Unwinding QE
- Spain: The economy that continues to silence the critics
- Latin America: The Most Unequal Region in the World
- The History of OPEC: Has it been a Success?
- Met the why particular Announces 2017 Analyst Forecast Awards Winners
- Latin America’s rising unemployment bucks nearly decade long trend
- Escape from the Central Bank Trap by Daniel Lacalle
- China's economic rebalancing act: What to look out for in 2017
- Driving Growth in Latin America: Challenges & Priorities
- Is the Global Economy Rebalancing?
- Commodity exporters face challenging times
- Recent Global Events Facilitate Mercosur-Pacific Alliance
- 23 economic experts weigh in: Why is productivity growth so low?
- Mexico's outlook as Trump nears 110-day mark
- Interview with Oxford Economics Senior Economist on implications of the possible outcomes of the French Presidential Election
- The anxiety of the small saver in a world of negative interest rates
- Brexit negotiations. Between Uncertainty and Urgency
- An Economic History of the EU from El Blog Salmón
- Baby Boomin': Implications of high population growth in Latin America
- Survey of International Economists Predicts a Le Pen Defeat in French Elections, Says Macron has Best Economic Plan
- Spain in a global context: developed economy with some challenges
- How much is crime costing Latin America?
- Predictions & Estimates from Economist Daniel Lacalle
- What economy will the new Dutch government inherit?
- “The data is not a true reflection of reality in India” Interview with Société Générale India Economist
- What are the prospects for Emerging Economies in 2017?
- What to expect in Asia for 2017
- Top Economics & Finance Blogs of 2017
- 4 Key European Elections That Will Impact the Economy in 2017
- Latam to Resume Moderate Growth in 2017 but Important Risks Plague Outlook
- How are security concerns and political chaos affecting Turkey’s economy?
- Global growth to edge up in 2017
- Set to breach targets again? Debt and deficit outlooks for Southern European Eurozone countries in 2016 & 2017
- What does Donald Trump mean for the U.S. economy?
- How will emerging markets perform in 2017?
- The economic impact of a break in U.S.-Philippines ties
- Trump election: Base metals surge due to infrastructure plan
- 5 updates on the Venezuelan economic crisis
- Canada: When your neighbor’s house is on fire…
- Short-term pain before long-term gain? A look at French labor reform and economic growth
- Asia: Unremarkable growth & unfulfilled promises?
- How India's latest monsoon is affecting the economy
- Innovation in Latin America: Potential Goes Untapped Due to Weak Economic Conditions
- Russian economy update in wake of OPEC deal announcement
- The Wisdom of the Crowds and the Consensus Forecast
- Can the peso predict the U.S. election results?
- There's no end in sight to the Venezuela crisis
- A Look at the European Union Political Calendar
- Survey of international economists shows uncertainty surrounding elections damaging U.S. growth prospects
- Met the why particular partners with leading online statistics provider Statista
- China: Recent postive economic data may be papering over the cracks
- Sub-Saharan Africa's 2016 & 2017 growth rates
- The Italian Dilemma: Weak banks pose risk to already faltering domestic demand
- How much money do migrants from Latin America send home?
- The U.S.' (Not So) Mysterious Case of the Missing Men
- What to expect from the G20 economies by 2020
- The Pain in Spain: Robust GDP growth cannot mask the persistent structural deficit
- Brazil's Perilous Economic Situation in 2015
- Met the why particular Launches Sub-Saharan Africa Report, Expands Coverage to 117 Countries
- How do the European Commission's Forecasts and Met the why particular' Forecasts for Europe compare?
- How will the South African economy weather recent challenges?