Slowdown in Canadian Economy

The slowdown in the Canadian economy and the resultant implication on the overall economic growth of the economy is an important part, which needs to be analyzed. The inflation rate in the economy and the falling price in the global commodity prices such as oil, which is Canada’s main export, were the key factors hindering the growth of the economy.

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Slowdown in Canadian Economy
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2SLOWDOWN IN CANADIAN ECONOMY
Slowdown in Canadian Economy
The slowdown in the Canadian economy and the resultant implication on the overall
economic growth of the economy is an important part, which needs to be analyzed. The inflation
rate in the economy and the falling price in the global commodity prices such as oil, which is
Canada’s main export, were the key factors hindering the growth of the economy. The
performance of the different sectors and industries in the economy and the resultant implication
of the same in the overall growth scenario of the economy are the key factors marking the
economic growth of the economy. The slowdown in the performance of the real estate sector
economy in Canada and the resultant spur in the economic growth of the Canadian economy is
the key factor taken into consideration (Canada’s third-quarter economic growth slows; rate hike
next week seen as unlikely 2018). The action for the central bank of the Canadian economy on
the event and the simultaneous action of the form of the interest rate changes is the key event that
needs to be taken into consideration (Gervais & Gosselin, 2014).
The Central bank of the Canada will unlikely hike the interest rate in the economy given
the current market situation and the business factors under which the Canadian economy is
undergoing. The higher mortgage rate in the economy were the key reason behind the fall in the
sale of the property and the poor performance of the real estate sector in the Canadian economy.
The economic growth for the third quarter was around 2.0%, which was less than the second
quarter performance of around 2.9%. The Canadian dollar has been volatile given the market
situation and the macro-environment influencing the performance of the same. The Canadian
dollar with respect to the US dollar has been quite volatile with the falling and the rising prices
of the global commodity prices such as Oil. The Canadian wholesale trade also fell by around
0.5% in the month of September (Fed’s Clarida backs rate hikes, but says central bank should be

3SLOWDOWN IN CANADIAN ECONOMY
even more sensitive to economic data 2018). The central bank of Canada has been quite
susceptible about the rate hike given the current market situation where the performance of the
economy has been quite cyclical given the volatility in the currency exchange rate, foreign
currency fluctuation, falling real estate sales and slowdown in the economic growth. The bond
yield for the Canadian Bond market has also been volatile given the current market condition
(Bagheri et al. 2018). The bond market for the Canadian economy declined by about 10 basis
point given the volatility in the interest rate. The Canadian dollar weakened to the nearly five-
month low after the volatility in the international market and the Canadian economy experienced
slowdown in the third quarter. The level of inflation rate for the Canadian economy also rose for
the last quarter when the cost for airfares, cars rose surprisingly. The price for the passenger
vehicles, which was one of the largest component of the index rose about by 2.5% and the prices
for the transportation rose by about 4.6%. The rising price in the gasoline also led to the fall in
the sales of the gasoline, which hindered the growth of the sales of the particular sector. The
financial events and factors discussed above shows the key reason and possible reason behind the
volatile economic growth and the reason behind which the Canadian economy faced a slowdown
in the third quarter (Poloz, 2015). There are many ways in which the economy could outperform
the economic growth given that the macro economic factors and the business factors identified
for the economy is forecasted and stays favorable. The level of business activity on the economy
and the growth in the same will be depend t on the level of the interest rate in the economy and
the possible positive business factors under which the business will be continuing its operations
(Inflation rises for first time in three months on rising costs for cars, airfares 2018). The Central
bank and the Federal Reserve would be focusing on the key economic data and the overall
market conditions in the economy before deciding on the final decision on the hike in the interest

4SLOWDOWN IN CANADIAN ECONOMY
rate (Lange, 2018). The hike in the interest rate scenario in the current volatile situation
slowdown the level of business activity and the chances for volatile macro-economic condition
would further hinder the growth rate of the economy. The forecasted inflation and the growth of
the economy will be dependently on the key macro-economic factors for the economy and the
performance of the economies globally. The expected level of inflation, interest rate in the
economy in the upcoming scenario will be dependent on the central bank decision on the rate
hike. The Canadian economy has been volatile but the underlying principles for the economies
stays strong. The retail sector of the Canadian economy is expected to contribute positively to the
Canadian economy giving a boost for the fourth quarter data (Ryan-Collins, 2015).
Thus after assessing the key and crucial events occurring in the Canadian economy we
came to knew about the various important factors on which are economy were dependent. The
key factors should be well identified by the economies and the relevant economic factors should
be taken into consideration and evaluated. The slowdown in the Canadian economy could be
well asserted and averted by the economies given the current situation of the economy. The
performance of the different sectors and industries in the economy and the resultant implication
of the same in the overall growth scenario of the economy are the key factors marking the
economic growth of the economy.

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Reference
Bagheri, M., Guevara, Z., Alikarami, M., Kennedy, C. A., & Doluweera, G. (2018). Green
growth planning: A multi-factor energy input-output analysis of the Canadian economy.
Energy Economics, 74, 708-720.
Canada’s third-quarter economic growth slows; rate hike next week seen as unlikely. (2018).
Retrieved from https://www.theglobeandmail.com/business/article-canadian-gdp-growth-
slows-to-2-per-cent-in-third-quarter/
Fed’s Clarida backs rate hikes, but says central bank should be even more sensitive to economic
data. (2018). Retrieved from https://www.theglobeandmail.com/business/article-us-feds-
vice-chair-backs-rate-hikes-but-says-central-bank-should/
Gervais, O., & Gosselin, M. A. (2014). Analyzing and forecasting the Canadian economy
through the LENS model. Bank of Canada= Banque du Canada.
Inflation rises for first time in three months on rising costs for cars, airfares. (2018). Retrieved
from https://www.theglobeandmail.com/business/article-inflation-rises-for-first-time-in-
three-months-on-rising-costs-for/
Lange, R. H. (2018). The effects of the US business cycle on the Canadian economy: A regime-
switching VAR approach. The Journal of Economic Asymmetries, 17, 1-12.
Poloz, S. S. (2015). Riding the Commodity Cycle: Resources and the Canadian Economy.
Speech to Calgary Economic Development, Calgary, 21.
Ryan-Collins, J. (2015). Is monetary financing inflationary? A case study of the Canadian
economy, 1935-75.

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Appendix
1) Interest Rate Movement
Calendar GMT Actual Previous Consensus TE Forecast
30-05-2018 2:00 PM
BoC
Interest
Rate
Decision
1.25% 1.25% 1.25% 1.25%
11-07-2018 2:00 PM
BoC
Interest
Rate
Decision
1.50% 1.25% 1.50% 1.50%
05-09-2018 2:00 PM
BoC
Interest
Rate
Decision
1.50% 1.50% 1.50% 1.50%
24-10-2018 2:00 PM
BoC
Interest
Rate
Decision
1.75% 1.50% 1.75% 1.75%
05-12-2018 3:00 PM
BoC
Interest
Rate
Decision
1.75% 1.75% 1.75%
06-12-2018 1:50 PM
BoC Gov
Poloz
Speech

7SLOWDOWN IN CANADIAN ECONOMY
2) Inflation rate movement
Calendar GMT Actual Previous Consensus TEForecast
17-08-2018 12:30 PM Inflation
Rate YoY 3% 2.50% 2.50% 2.40%
21-09-2018 12:30 PM Inflation
Rate YoY 2.80% 3% 2.80% 2.80%
19-10-2018 12:30 PM Inflation
Rate YoY 2.20% 2.80% 2.70% 2.60%
23-11-2018 1:30 PM Inflation
Rate YoY 2.40% 2.20% 2.20% 2.40%
19-12-2018 1:30 PM Inflation
Rate YoY 2.40% 2.40%
25-01-2019 1:30 PM Inflation
Rate YoY 2.40%
22-02-2019 1:30 PM Inflation
Rate YoY 2.40%