CIBC is estimating that the Canadian economy will barely keep its head above water over the course of the next year. The national economy is expected to grow at 2.1%, and along with a slowing global economy, this is expected to hold interest rates low for the foreseeable future.
Canadian consumers have exhausted much of their savings and their spending has almost reached its limit. Borrowing rates are high, which leaves Canadian consumers with little room to increase spending in case wages increase in the near-term, which is very unlikely.
Personal consumption, as the largest component of GDP or gross domestic product, plays the primary role in determining our nation's growth rate. Net exports (exports - imports), however, also play a major part, and with growth in the United States at a standstill, there is little room for expansion here in the near-term.
Harper's conservative government has been trying to diversify Canada's export market through trade negotiations with China and South-East Asia, but finalizing international trade agreements takes a lot of time, and may not even contribute to net exports over the long-term, especially if imports remain high.
So what does this mean for the Intelligent Investor? Mortgage rates and borrowing terms should remain favourable for the average Canadian household, and real estate prices, as a result, should still experience some near-term support.
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