A report published as part of the autumn edition of the Bank of Canada Review, a twice-yearly collection of academic papers by bank economists, concludes that the slow economic growth in Canada is here to stay.
Overall, there is increasing evidence that growth in advanced economies may remain slow in the immediate future compared to its pre-financial crisis average, as a result of a combination of cyclical and structural factors,” according to experts.
While cyclical factors including households and governments debts will eventually ease, longer-term factors, including the aging population and slowing labour force expansion, will continue to hamper economic growth.
One of the most significant longer-term problems is the slowing growth rate of the working-age population as the baby boom generation retires. The report pointed out that later retirement and increased participation by women have in the past helped offset demographic trends.
While the economy has usually revived rapidly from recessions with above-average growth, this was not the case after the Great Recession of 2008-09. Instead, growth averaged just 1.4 per cent a year in advanced economies between 2010 and 2014. The Bank of Canada has repeatedly revised its forecasts lower and in October it cut the forecasted gross domestic product to 2 per cent in 2016 and 2.5 per cent in 2017.
Recently the central bank confirmed it will begin publishing a quarterly consumer confidence survey in 2016. This data has generally not been made public previously. Titled the Canadian Survey of Consumer Expectations, it will track Canadians’ attitudes to inflation, the job market, household income and spending as well as house prices.
Inflation data is currently missing from the Conference Board of Canada’s monthly consumer confidence index. Monitoring the behavior of inflation expectations is critical to gauging future inflation pressures.
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