The Conference Board outlook observes that the U.S., Canada’s biggest trading partner, showed a decline in the first quarter of the year, but that the weak Canadian start to the year was also the result of business holding back on investment, and governments at both the federal and provincial levels still in fiscal restraint mode. The Board continues, saying that the situation should improve next year with stronger U.S. growth, which will boost Canadian hiring and investment.
The Conference Board anticipates that the federal government will have a budget surplus ahead of the 2015 election year, and is likely to loosen its tight spending. The report says that overall consumer prices and core inflation are on the rise, and U.S. growth is gaining momentum, helping to reverse the loonie’s decline. The Board concludes that Canadian monetary policy remains highly accommodative, and stronger inflation numbers have eliminated any talk of reducing rates further. The report adds, “While the near term still presents challenges for a number of provinces, the positive developments south of the border will help restore business confidence in Canada and help stimulate export and investment going into 2015.”