Our comprehensive assessment of Canada's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Canada, as well as the latest industry developments that could impact Canada's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Canada before your competitors.
Canada Country Risk
The key theme for Canada's economy over the coming years will remain 'rebalancing', as private consumption and high oil prices can no longer be relied upon to provide robust economic growth.
Canada's 2015 federal general election remains the Liberal Party's to lose as polling data and recent election wins at the provincial level suggest momentum is with the opposition party.
A steady pick-up in external demand and exchange rate depreciation will continue to shrink Canada's current account deficit over the coming years.
Key Forecast Changes
We have revised our current account deficit forecast for 2014 from 3.1% of GDP to 2.8% as stronger exports suggest the goods trade balance will move into surplus.
Canada Industry Coverage (19)
Agribusiness Market Value BMI Market Value By Commodity (% of Total) (2010-2018)
BMI View: Grain production will fall in Canada in 2014/15, as logistical problems during the 2013/14 season have resulted in high stocks of wheat, corn and barley. The country's livestock industry is well placed to post strong growth in 2014/15 and beyond, while we believe that the Canadian beef and pork industries will gain the most from having signed the EU-Canada Free Trade Agreement in October 2013. The dairy management system, however, could be under pressure.
Looking to 2015 and beyond, we maintain our view that the market will slow from its current pace, but positive growth, can be sustained over our forecast period to 2018, particularly if a soft landing for the housing market - a key indicator of light truck demand - can be successfully engineered. Our expectation for no rate hikes until the end of 2015 at the earliest also bodes well for vehicle sales, as auto loans have been driving growth in recent years thanks to low rates and longer terms. Â
However, this does exacerbate an issue we have previously highlighted in that household deleveraging will need to take place over the span of our forecast period. While the more painful recovery has seen US debt-to-GDP fall from 95% in Q109 to 76.7% in Q413, Canadian debt-to-GDP has continued to climb, reaching 97.4% at the end of 2013. Addressing this will impact private consumption. Nevertheless our average annual forecast of 1.8% growth in light...
Defence & Security
Canada Defence & Security
BMI View: Canadian defence spending has been steadily increasing as the country has sought to address concerns over maritime sovereignty and the protection of natural resources. However, cost saving measures are being considered and in some cases implemented so that the long term goals are met. T he reduction in short term defence spending could cause delay s Â for certain much-needed procurements to bring the country in line with its NATO peers' spending in anticipation of deployments to counter ISIS movements .
Current plans are to upgrade, enhance and to extend the life of their current military technology. The CF...
Food & Drink
Canada Food & Drink
BMI View : The Canadian economy will continue to expand at a steady pace, as household consumption growth will remain supported by easy monetary policy and a gradually tightening labour market. We forecast real private consumption growth of 2.0% in 2014, a slight moderation from the 2.4% growth recorded in 2013. However, unemployment remains at 7.0% , and the pace of job formation is noticeably lagging the US. Moreover, recent quarters have seen expectations point to gradually tighter credit conditions. Coupled with central bank efforts to engineer a soft landing of the housing market , this will likely see household spending growth moderate in the coming quarters. Beyond this year, we forecast private consumption growth to rise t o 2.3% in 2015 and 2.4% in 2016...
Canada Freight Transport
Economic growth in Canada will continue to accelerate in the coming years, having come in above our expectations in 2013, which is good news for the country's freight industry. The economy posted 2.0% real GDP growth last year, exceeding our 1.7% estimate. This was partly thanks to a stronger net export contribution, as well as continued growth in household consumption. Annualised real GDP growth rose to 2.9% quarter-on-quarter (q-o-q) seasonally adjusted in Q413, an acceleration from the 2.7% growth rate recorded in Q3. Household consumption contributed 1.7 percentage points (pp) to the headline growth figure in Q4, bringing the full-year contribution to 1.3pp. Net exports added 0.2pp, with a full-year contribution of 0.3pp. We expect this trend to remain in place, with the net export contribution, set to increase to 0.7pp this year, while household consumption will contribute a somewhat lower 1.1pp to growth this year.
Exports of goods and...
Canada Information Technology
BMI View: Â WeÂ expect Canada's IT market to record growth of 3.2% in 2014, and forecast a CAGR of 4.1% 2014-2018. The maturity of the Canadian IT market means that growth rates will be markedly slower than those achieved by emerging markets in Latin America , but in terms of spending per capita Canada will continue to be one of the most lucrative markets globally. Â Premium consumer hardware will remain a growth area, with Apple expected to hold onto its prominent position, Â but over the medium term the areas we identify for outperformance include enterprise adoption...
BMI View: Â The Canadian construction sector continues to suffer from limited growth, leading to a downward revision of our expected real growth to 1.7% in 2014. Â This is caused by the continuing weakness of the residential sector , counteracting stable growth in infrastructure. We further expect a positive impact of the CAD53bn New Building Canada Plan for the latter by as early as 2015 , and remain hopeful for the residential sector to exceed our expectations based on favourableÂ mortgage value, home prices and sales data.
BMI View: Â Key trends are emerging with the publication of updated results from leading players in the Canadian insurance sectors, with many companies reporting only limited growth in this already very well established market. Indeed some areas may see declines in 2014 and 2015, though we are forecasting overall growth by 2018 thanks to consolidation of costs and increased efficiencies which will boost profitability.
Growth is expected to be subdued for most of the non-life companies in Canada, though this less than positive outlook is easily offset by the disciplined nature of the major players in terms of the risk they underwrite and the strength of pricing power in most lines. Some areas face particular challenges due to a substantial rise in claims, such as the auto insurance sub-sector in Ontario and we expect to see only pedestrian growth in premiums during the...
Canada Medical Devices
Espicom Industry View : Â Canada has a sophisticated and well established medical device market which ranks ninth in the world in terms of value. The market is e xpected to grow at a CAGR of 4.0 % over the 2013-2018 period. This steady growth Â should see the balance of trade deficit widen owing to Canada's reliance upon imports.
Headline Industry Forecasts
Canada's medical device market ranks as the ninth largest in the world. In 2013, the medical device market was estimated at US$6.8bn...
BMI View: Â Canada's Â trade relationships with both the US and Mexico will encourage Â output growth in its metals industry to 2018, as the country remains a net exporter in refined metal . Increasing manufacturing and industrial activity in the latter two countries should help drive demand for metal inputs. Moreover , a weaker Canadian dollar against the US dollar should provide upside for Canadian exports. Â
Our forecast for accelerating economic growth in the US and Mexico, combined with our view that the Canadian...
BMI View: Â Canada 's diversified mineral base and well-developed capital markets Â will enable it to remain a Â major player in global mining production and financing . Indeed, the country will remain a top-ten global producer of zinc, lead, iron ore, nickel, copper, gold, silver, uranium and Â potash Â over the next five years.
Canada's advantages as a mining destination will persist in the coming years, enabling solid, if...
Oil & Gas
Canada Oil & Gas
BMI View: Â The outlook for Canada's oil and gas industry is still a positive one, though its upstream potential needs more support from the community and the government for infrastructure development. Â Indeed, challenging project economics could slow the growth of oil-sands driven production, weighing on total hydrocarbon output. That said, while this acts as a significant downside risk, we also note risks to the upside as well, with potential for exploration in the country's offshore acreage and unconventional resources to unearth more oil and gas reserves to support the country's long-term growth prospects . Â
The main trends and...
BMI View: Chemicals, plastics and rubber manufacturing sales experienced a sharp downturn following the 2008 financial crisis, a situation Canada shared with the global market. In following years, the industry has staged a gradual, if unspectacular, recovery. By 2013, the industry was back to the level of sales seen before the crisis due primarily to growth in exports to the US, Canada's main petrochemicals export market .
In 2013, plastic manufacturing sales made a partial recovery from the temporary slump in Q113 when output was undermined by stoppages and moderating market activity. BMI estimates that the overall chemical capacity utilisation rate was around 81% in 2013, two percentage points (pp) higher than the previous year. However, plastics and rubber rates were each 1pp lower at around 76% and 82%, respectively. Chemicals sales trends...
Pharmaceuticals & Healthcare
Canada Pharmaceuticals & Healthcare
BMI View: Â Canada Â will continue to attract pharmaceutical companies to lau n ch innovative medicines due to the hospitable business environment, improving healthcare coverage and broader drug reimbursement lists. Â The regulatory authority also encourages pharmaceutical companies to invest in research and development. However, cost containment policies in the public healthcare sector will continue to put pressure on Canada's medicine prices.
Headline Expenditure Projections
Pharmaceuticals: CAD25.6bn (USD24....
BMI View : Â Our fundamental assumptions of the market continue to be relevant and therefore our short- and long-term forecasts remain mostly unchanged.Â Although e conomic growth in Canada will gradually accelerate over the next few years , Â according to our country risk analysts the Â growth outlook for the country , remains b elow consensus expectations, reflecting BMI 's concerns about high household debt levels and declining commodity prices . With...
BMI View: Â On paper, Canada is an excellent candidate for non-hydro renewable development; with vast wind resources, plenty of land to construct wind farms, a national commitment to rid itself of coal fired electrical generation and a safe investment climate. But the country's constitutional arrangements, which leave emissions targets with the federal government and precise energy mix policies with provincial jurisdictions , have created a patchwork quilt of markets and policies across the country. Â Canada does provide opportunities, especially in the emerging in-stream tidal sector and wind, but is a laggard in adopting other renewable technologies at scale. Â However, the country is the world's largest...
Economic growth in Canada will gradually accelerate over the next few years, helped by a continued expansion in private consumption and a return to positive growth in fixed investment. Our growth outlook, however, remains below consensus expectations, reflecting concerns about high household leverage, declining commodity prices and recent weakness in US economic data.
We forecast 2.1% real GDP growth in 2014 and 2.3% growth in 2015. As we have previously noted, our stronger growth forecasts over the next few years by no means represent a firmly optimistic outlook on the economy, as we remain below consensus. Indeed, a recent monthly Bloomberg survey shows consensus expectations of 2.2% and 2.5% in 2014 and 2015 respectively, with this year's reading being a revision from 2.3% previously, suggesting that consensus is slowly converging with our own projection of 2.1% growth for this year.
In 2014, we have pencilled in a...
BMI View: Â Perhaps inevitably, no new significant players entered the Canadian mobile market as a result of the auction of 700MHz spectrum in early 2014. The three incumbent national players took the majority of the spectrum, with cable-focused Rogers laying claim to the most valuable properties in the hope of adding lustre to its converged services portfolio. Meanwhile, the government blocked the sale of spectrum , owned by defunct NextWave , to a Bell - Telus joint venture and reinforced its commitment to nurturing competition by blocking Telus' bid to acquire struggling new entrant Mobilicity ...