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Trends impacting Canadian Economy

Assignment 1

Trends Impacting Canadian Economy

Date: 10/11/2017
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Trends impacting Canadian Economy

Trends Impacting Canadian Economy

Introduction

The topic I’m discussing here is ‘Trends Impacting Canadian Economy’. It is very important
to analyze the trends impacting an economy since they indicate the overall direction in which a
nation’s economy is moving. In order to make accurate and effective economic plans economists
of every nation should study the recent economic trends and where they lead to. This study or
technical analysis of current and future trends and future stock movements is known as Trend
Analysis. Trend analysis involves looking at current trends and predicting future trends by
attempting to determine a current trend such as gains in a particular market sector would
continue to and whether a trend in one sector could result in a trend in another one (analyst,
2017).

According to recent data, Canadian economy is on a fast pace since 2014. It has shown a
growth in GDP that overshot the expectations of economists in May 2017. An increase in oil and
gas production clearly fueled the seven month rise and the country likely out performed its G7
peers. As a result, there has been a growth in labor market and the unemployment dropped to
the lowest since 2008. On the other hand wages remain the same (Evans, 2017). On a political
note, NAFTA re-negotiations are widely being discussed among economists.

Latest trends in Canadian economy:

Consumer spending, Real Estate and Trade

2017 is a great year for Canadian economy. It is expected to grow by 2.9 percent in 2017
but it will slow down to 1.9 percent by next year. Household expenditure is one of the most
important factors that contributed to this year’s strong economic growth. Consumer spending
has shown a rapid rise in this year. It’s the highest in the last seven years. However in 2018, higher
debt, declining job growth and easing real estate prices will bring down the customer spending.
Real estate has the same story to tell. It already hit a five year high but will decline by next year.
With real estate and consumer spending slowing down the economy will depend on international
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Trends impacting Canadian Economy

trade and business investments. There has been a rise in business investments in the first quarter
of this year. Exports also shows a slight pickup and it could pick up more pace next year. At the
same time, the trade policies of the new U.S government raises concerns regarding the future of
exports to the country. U.S is the biggest importer of Canadian goods. It is also expected that
there will be higher federal spending in the immediate future. Bank of Canada continues its policy
of tightening to avoid inflation. An interest rate increase is expected in the last quarter of 2017
and another one in 2018 (Alexander, 2017).

NAFTA

Trade agreements can be evaluated in several ways. The best way is to analyze how well
an agreement served its purpose. The North American Free Trade Agreement (NAFTA) is one of
the most important trade agreements signed by Canada. It has clearly increased trade and
investment among the three members over the years. The latest changes in U.S-Mexico
relationship raises concerns to Canada as NAFTA re-negotiations are going on. This relationship
is critical for the future of the agreement.

Fig.1.1 Source: www.business.financial post.com (Gignac, 2017)

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Trends impacting Canadian Economy

International Monitory Fund predicts Canada’s economy to grow 2.5 percent this year. Now
Canada is the leader in economic growth among G7 nations.

Immigration

Canada has become the most favorite destination for immigrants. Canada offers higher
life standards, education and security. Organization of Economic Cooperation and Development
says that Canada’s immigration rate is the highest among OECD nations. Current data show that
Canada’s immigration rate is about 0.7 percent of its population. 50% of these immigrants are
highly educated and their contribution is highly valuable for Canadian economy. With an aging
native population and declining birth rates, immigration is the key to Canada’s economic growth.
World Economic Forum ranks Canada as the seventh most efficient labor market. Highly efficient
labor market means the labor force is utilized well by effective and efficient use of their skill sets.
Canada’s move to liberalize labor market is paying off bigtime (Gignac, 2017).

Fig: 1.2 & 1.3 Source: www.immigration.ca (Canada Immigration, 2016)

The graph shows the percentage of immigrants in labor force has risen from less than 20
percent in 2006 to almost 24 percent in 2016. On the other hand the percentage of Canada born
workers has declined from almost 79 percent in 2006 to almost 74 percent in 2016. The current
analysis say Canada cannot grow further without immigrants because of the declining number of
Canadian born workers and the skill level required in technical sectors. Immigration has been the
Government’s agenda and it will continue to be so in the coming years because of ageing
population and low fertility rates, shrinking labor force and requirement of highly skilled workers.
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Trends impacting Canadian Economy

As I pointed out earlier, Canada’s housing market is on the rise. Immigration has a major
role in this surge in real estate. Majority of the immigrants are in 20-44 age range. Most of them
have young families. This is the major reasons why Canada’s housing market is so alive these
recent years (Gignac, 2017).

Energy

All the industries are trying to cut down their carbon foot print lately in order to protect
the environment and minimize environmental impact. In recent years investments in renewable
energy is skyrocketing. There are a lot of research going on to develop alternative energy sources
as well. Solar and wind are the potential alternatives that could take over fossil fuels as sources
of energy.

But according to IEA fossil fuels are cheaper to produce with the current technological
constraints and Canada has plenty of Oil and Gas underground. Solar and wind makeup less than
a percent of total energy produced right now and only make up less than 3 percent by 2040.
According to the Canadian Association of Petroleum Producer’s latest forecast, oil sands projects
re expanding and will increase production by 1.3 million barrels by 2030. Even Canada’s Energy
Board statistics shows that oil sand will make up the majority of production in Canada up to 2040
and beyond.
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Trends impacting Canadian Economy

Fig 1.4 Source: www.eia.gov (Canadian Crude oil production statistics, 2017)

This would bring a lot of new projects into existence such as the trans-mountain pipeline and the
northern gateway pipeline projects. Trans Canada’s Energy East will carry oil from Alberta to the
east coast. These projects would not only bring jobs but also boost the economy. But still there
is a lot of confusion going on with the government whether to cut down emission or to boost oil
production and sales and become an oil & gas super power (Hussain, 2014).

Entreprenuership

As of December 2015, there were 1.17million businesses in Canada. Of these 1.14 million
(97.9 percent) businesses were classified as small businesses (Key small business statistics, 2016).
Over half of the 1.14 million small businesses concentrated in five industries: retail trade (12.5
percent), construction (12.2percent), professional and technical services (12 percent), other
services (9.6 percent) and health care and social assistance (9.2 percent) (Key small business
statistics, 2016). Small businesses play an essential role in moving Canada’s economy forward.
They are risk takers, they are
innovators and they are community
builders. But most importantly they are
‘job creators’ (King, 2013). Their role in
stabilizing the often volatile economy
of Canada is critical. Small businesses
are an engine of growth. They are
powering the Canadian economy by
contributing a major share to the
country’s GDP by providing
employment to the citizens and
through exports. In 2015, the Canadian
private sector employed over 11.6
million people. Majority of these
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Trends impacting Canadian Economy

employees worked for small businesses constituting 70.5 percent (8.2 million) of private sector
employment. By comparison, medium sized businesses employed 19.8 percent (2.3 million) and
large businesses employed 9.7 percent (1.1 million) of private sector workforce. In total, small
businesses employed 90.3 percent (10.5 million) of the private sector workforce, highlighting the
important role that small businesses play in Canadian economy (Key small business statistics,
2016). The highest share of total employment in small businesses was found in British Columbia
(93.6%) followed closely by Saskatchewan (93.1%). While the lowest share of total employment
occurred in Ontario and Alberta. But these two provinces are employing a staggering 87.3 percent
and 91.2 percent (Key small business statistics, 2016).

How these trends affect my business project ‘Quick Delivery Services’ (QDS)

As the economy goes up employment rates and wages go up as well. Hence the
purchasing power of the population increases. Quick delivery services is a business that focuses
on purchases and shopping. According to a Fraser Institute study median income in Canada has
increased 52 per cent from 1976 to 2011 which is the latest readily available data (Lammam,
2016). The more the consumer purchases or the more the number of consumers, the more
profitable we are. With immigration, lots of families are moving into the community. This
indicates more demand for convenience and shopping products. This also means that availability
of cheaper labor force due to increased competition since we focus mainly on students on part-
time basis as out employees.
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Trends impacting Canadian Economy

References

Alexander, C. (2017). Conference board of CAnada upgrades Canada's economic growth forecast.
Retrieved from www.conferenceboard.ca.

analyst. (2017). Trend analysis. Retrieved from www.investopedia.com.

Canada Immigration. (2016). Retrieved from www.immigration.ca.

Canadian Crude oil production statistics. (2017). Retrieved from www.eia.gov.

Chandler, V. (2010). The economic impact of canada small business financing rogram. Retrieved from
www.ic.gc.ca: https://www.ic.gc.ca/eic/site/061.nsf/vwapj/Impact_CSBFP-
PFPEC_eng.pdf/$FILE/Impact_CSBFP-PFPEC_eng.pdf

Evans, P. (2017, August). Canada Economic forecast. Retrieved from www.focus-economics.com.

Gignac, C. (2017). For Canada, Immigration is a key to prosperity. Retrieved from

www.beta.theglobeandmail.com.

Hussain, Y. (2014). Missing the big picture; pipelines create jobs but what they really do is boost the
economy. Retrieved from www.financialpost.com.

Key small business statistics. (2016, june). Retrieved from www.ic.gc.ca.

King, R. (2013). Small Businesses powering economy. Retrieved from www.canadaone.com.

Lammam, C. (2016). Canadian middle class income, purchasing power up dramatically. Retrieved from
www.fraserinstitute.org.

Ubiquitous. (2016, June). Key small business statistics. Retrieved from http://www.ic.gc.ca:
http://www.ic.gc.ca/eic/site/061.nsf/eng/h_03018.html
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Trends impacting Canadian Economy