The Royal Bank of Canada (RBC) expects economic growth to slow down this year amid looming interest rates hikes and lower consumer spending. Its latest economic outlook pegs gross domestic product growth at 1.9% in 2018 and 1.6% in 2019, following a 3.0% expansion in 2017.
In particular, RBC chief economist Craig Wright said in a statement that rising interest rates will take their toll on indebted Canadians throughout this year. "But a healthy labour market and rising wages will help soften this blow. While the Canadian consumer reins in their spending, we expect business investment and government outlays to contribute more significantly to the economy,” he added.
As for the housing market, RBC predicts improved demand-supply conditions in 2018 with more balanced house prices, after tighter conditions last year. Price increases are expected to drop from 11.1% in 2017 to just 2.2% in 2018. “As a result, housing sales are forecast continue to soften in 2018,” said RBC.
Saskatchewan is forecasted to lead all provinces in GDP growth this year at 2.9%, followed by another “solid” 2019 at 2.5%. Meanwhile, comparable figures for Ontario stand at 2.0% for 2018 and 1.6% for 2019. Quebec is forecasted to settle at 1.9% this year after a stellar 3.0% growth last year – more than twice the national average.
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