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Economic Overview
2016-2020 FINANCIAL PLAN
Canadian retailers should see the benefits of a lower Loonie in 2016 as fewer shoppers
cross the border south. However, their success will be contingent on their ability to
control import costs and pass price increases on to the final consumer. The export,
manufacturing and tourism sectors should also see gains as the US economy
strengthens.
Canada recorded a 9.3% increase in inbound overnight trips by US residents in the first
10 months of 2015. This trend is expected to continue and even accelerate as US
tourists come to take advantage of their enhanced purchasing power north of the
border.
Most analysts expect the Bank of Canada (BOC) to hold the target for the overnight
interest rate at 0.5% during 2016 after two 25 basis point cuts last year. However, as
emerging data continues to point towards a worsening economic outlook, some
commentators are not ruling out the possibility of further interest rate cuts in the near
future.
The BOC continues to cite over-leveraged households as a domestic threat to the
economy. In an attempt to cool down the housing market, the federal government has
introduced increased down payment requirements for buyers taking out a CMHC insured
mortgage. For properties priced between $500,000 and $1 million, the required down
payment is now 5% on the first $500,000 and 10% on the balance. This measure is
expected to affect a very small portion of home purchases and was introduced largely in
response to the hot housing markets of BC and Ontario.
Source: Bank of Canada
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