Macroeconomics Canada

Executive Summary

The Macro analysis of Canada is been undertaken to make a comprehensive analysis of the economy. The analysis is been focused on various indicators like inflation, interest rate, unemployment rate, currency & commodity movements. The movements of these indicators are analyzed to understand the policy changes namely - fiscal policy by the government of Canada and monetary policy by the Central Bank of Canada.

The GDP of the country is been studied from its Expenditure side. The GDP from its various components is been visualized in conjunction with economic indicators. The proposed measures by the Government of Canada to boost the economic activity are been summarized and correlated with expenditure components of GDP to the best.

Introduction

Canada has the 10th (nominal, as shown in Figure-1) or 15th-largest (PPP) economy in the world (measured in US dollars at market exchange rates), is one of the world's wealthiest nations, and is a member of the Organization for Economic Co-operation and Development (OECD). As with other developed nations, the Canadian economy is dominated by the service industry, which employs about three quarters of Canadians.

[pic 1][pic 2]

Figure – 1: World GDP Ranking (2015)

The Canadian economy is currently undergoing an intricate adjustment process following the collapse in commodity prices. Business investment has dried up as capital expenditure in Canada’s oil producing regions has fallen sharply. Alberta, Canada’s largest oil producing province, suffered a further setback in May, when wildfires swept across the northern part of the province, interrupting oil production. This has resulted in a housing price crash in Alberta, as well has heightened unemployment and reduced consumer spending.

Uncertainty stemming from the Brexit vote, which could impact investment and consumption, looks set to drag on growth this year. In the longer term, Canada’s output gap should narrow as stimulative fiscal and monetary policy begins to support investment and consumption. Analysts expect the economy to expand 1.3% in 2016, which is down 0.1 percentage points from last month’s forecast. For 2017, analysts foresee economic growth of 2.1%.

Macroeconomic Factors that impede the GDP Growth– Canada              

Source: Fiscal policy Canada

The Canadian economy is facing significant challenges in the past years. It emerged from recession in the third quarter of 2015 with a healthy growth of 2.3%. But growth in 2016 is projected to be moderate due to slowdown on the consumer side. Consumption is 70% of Canada’s GDP, so it matters very much how Canadians are feeling and whether they are spending. Job and wage growth will be very soft in 2016 as weakness in the oil patch and natural resource industries offsets rosier growth in manufacturing and services. Worse, Canadians are struggling with high levels of debt, now at a record high of 164% of disposable income.