![Canadian economic recovery will be unconvincing: Report](https://www.benefitscanada.com/wp-content/uploads/sites/7/2010/12/graph-increase-market-rise-e1494619786754.jpg)
While the Canadian economy has been in a mild recession over the first half of this year, it will regain some lost momentum by year-end, although the recovery will be unconvincing and riddled with risks, according to the Russell Investments Fourth Quarter 2015 Strategists’ Outlook.
“What curbs our enthusiasm is that business investment remains elusive on two fronts: capital investment in the energy sector, which has been stunted by low oil prices, and in the manufacturing sector, which has not yet had enough time with a weak loonie to bring manufacturing capacity back online,” says Shailesh Kshatriya, director, Canadian strategies at Russell Investments Canada Limited.
Read: Positive signs for Canadian economy
He also believes that while investor attention may be fixated on oil and the energy sector, it’s the housing market that continues to pose the greatest long-term threat to the domestic economy.
On a positive note, the report highlights that employment growth nationwide is low but positive on a six-month trend basis and household spending has held up, as the depreciating Canadian dollar relative to the U.S. dollar may reduce the incentive for Canadian consumers to cross-border shop.
The report also indicates that if the domestic economy continues to deteriorate, the Bank of Canada (BoC) will not stand idle. But in order to do so without getting into unconventional monetary policy, keeping rates steady for the remainder of this year allows the BoC to have capacity to react next year.
Read: OECD cuts Canadian growth forecast
The strategists continue to expect the Fed will hike interest rates in December and they believe the pace of future interest rate hikes will be more important than the initial timing. This expectation is based largely on the fact that the U.S. economy is big enough, domestically oriented enough and strong enough to shrug off downside risks from abroad.
U.S. GDP growth is forecast to stay in the 2% to 2.5% range, while a 2.8% 10-year Treasury yield is expected over the next 12 months.
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