Research

Modest economic growth, sustained commodity prices will keep corporate revenue on an upward trajectory

By James Langton |

The outlook for Canadian non-financial companies in 2018 is stable amid solid economic growth and an expectation that commodity prices will stabilize, Moody's Investors Service says in its annual report published Tuesday.

The majority of Canadian sectors have stable outlooks, and some negative outlooks are set to revert to stable in commodity-related sectors as their output prices hold up, Moody's says.

"Government infrastructure spending and increased business investment are key drivers of our forecast for 2.3% real GDP growth in Canada over the next year, while unemployment will remain below 7%," says Peter Adu, analyst at Moody's, in a statement.

"This modest but healthy economic expansion, combined with sustained commodity prices, will keep Canadian corporates' revenue on an upward trajectory in 2018," Adu says.

The risks to economic growth include high household debt, elevated home prices and rising interest rates, which could limit household spending.

Additionally, the strengthening Canadian dollar and the potential for NAFTA renegotiation could slow export growth, says Adu.