This growth is for real – prepare for a second interest rate hike

There are several positive factors about Canada’s current economic growth, apart from the sheer magnitude: +4.5% in the second quarter of 2017 compared to the same period on 2016. Also positive was that the growth was broad-based: according to the Financial Post, 14 of 20 industrial sectors saw gains in June.

One sector which stood out in this quarterly report was residential investment, which fell by 4.7%. When the Toronto real estate market was breaking records this spring, fears were widespread that the imminent decline in real estate prices would endanger the whole economy. It is positive that the recent pull back in Canada’s hottest real estate market did not restrain overall economic growth, while the price correction in itself was a welcome development.

Business investment, remained robust. Capital expenditures by businesses in Canada had dropped sharply in the period 2014-2016, reflecting the decline of investment in the oil and gas sector. But the investment bounced back, growing by 13.7% in the first quarter of 2017 and continued even stronger in the second quarter, up by 7.1%.

These numbers show a strong organic growth in the economy which makes it a real possibility that the Bank of Canada will raise the interest rate as early as this week.
Ukrainian Credit Union Limited