Economists at Bank of Nova Scotia have lowered their forecast for Canadian gross domestic product (GDP) growth, and revised their view of the provincial growth picture, amid the recent decline in oil prices.
In a new report, the bank’s economists have lowered their real GDP growth forecast for next year to 2.3%, down from their earlier forecast of 2.5%. And, they say the “lingering effects of the investment slowdown are expected to pull growth down further” in 2016, where they’ve cut their forecast from 2.4% to 2.0%.
While they expect the lower oil prices to help bolster household purchasing power and to reduce operating costs for many businesses, overall corporate profit growth is expected to slow to the mid-single digits next year from nearly 10% in 2014, the report says. And, it expects that lower oil prices will weigh on capital spending.
The report also sees a notable shift in sectoral growth patterns. “Housing and retail activity will benefit from the ultra-low interest rate environment that should persist amid more moderate growth and low inflation. Manufacturing should benefit from the combination of lower energy costs and a weaker Canadian dollar. Transportation (e.g. airlines), hospitality and household/personal services industries also are relatively energy intensive,” it notes.
Moreover, it sees a shift in regional growth disparities too. “The combination of lower energy prices and a weaker Canadian dollar will shift Canadian growth momentum away from resource-rich regions, primarily in the West, toward the more manufacturing-centric provinces in Central Canada,” it says.