A number of our clients do business in Canada. It is one of the world's top trading economies, despite its relatively small population. Canada is a major exporter of commodities and food, and boasts expansive oil reserves. The country has strong trade links with the US and is increasing its trade with Asia. Our coverage – using our unique Total Analysis model – ensures that our clients make sound investment decisions in Canada. Our teams keep our clients informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. We also provide in-depth analysis on 23 of Canada's most important industries. Combining interactive data and forecasting with our risk-assessed and results-proven analysis gives our clients the big picture they need. We are confident that you, as our client, will find doing business in Canada is made easy.
Canada Country Risk
Economic growth will gradually recover after the oil-shock led collapse in investment. Higher manufacturing activity will driver stronger investment in the non-energy sector over the coming years.
Stronger US demand and a weaker exchange rate will lead to a gradual rebalancing away from Canada's high reliance on commodity exports.
The Bank of Canada will keep its key policy rate unchanged at 0.50% until 2017 amid low inflation and weak growth.
Key Forecast Changes
We have lowered our 2015 real GDP growth forecast from 1.5% to 1.2% after weaker-than-expected growth in the first two quarters of the year.
We now see a steady narrowing of Canada's current account deficit, having previously...
Canada Industry Coverage (20)
BMI View: Grain production will decline due to lower yields and plantings, except for corn, which will thrive on demand from the livestock and ethanol sectors. Sugar production will decline for the third consecutive year as the sector faces a long-term threat from large producers. Poultry will remain the most consumed meat in Canada and will post the strongest growth out to 2019.
|Agribusiness Market Value|
|BMI Market Value By Commodity (2011-2019)|
|e/f= BMI estimate/forecast. Sources: FAO, BMI|
With growth of 7.5% y-o-y in 8M15, Canada's light truck segment is still the driving force of the overall market. This has negative connotations, however, when it also makes up the majority of sales in provinces hit by the drop in oil income. Alberta is the most obvious example, underperforming both the national market and other provinces in H115 (latest available sub-national data) with a total sales decline of 9.2% y-o-y. In June alone, truck sales (including SUVs, minivans, trucks and buses), which account for around 77% of total sales due to their dual industrial and private use, fell 16.3% y-o-y.
Alberta has the third highest sales in the national market, and as such, disruptions on a provincial level will eventually filter through to the wider market. As such we have revised down our already conservative growth forecasts for 2016. We now expect a further decline of 2.0% in passenger car sales, which have been on a downtrend on...
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. The reduction in short term defence spending could cause delays 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-18 jet-...
Food & Drink
Canada Food & Drink
BMI View: Canada's economy is likely to have undergone a technical recession in the first half of 2015 (defined as two consecutive quarters of negative growth) as the repercussions from falling oil prices hit the resource industry, and leading indicators show that the manufacturing sector is struggling to regain strength. Despite continued growth in private consumption, deteriorating labour market dynamics mean this trend is likely to be unsustainable over the coming quarters. The food market is set to be an underperformer in Canada over our forecast period, with stronger growth in drinks and mass grocery retail.
Headline Industry Forecasts (local currency)
2015 per capita food consumption growth = +1.5% y-o-y; forecast compound annual...
Canada Freight Transport
BMI View: We anticipate growth across all three freight sectors in Canada, with the rail sector achieving the highest levels of growth of 3.3% in 2016. This trend falls in line with signs of a general economic recovery in the country and growth in all key trade indicators, with total trade growing by 3.2% in 2016 and peaking at 3.5% in 2017. Canada will continue to trade primarily with the US and signs of economic recovery in the US should have a positive effect on demand for the country's goods.
We forecast real GDP growth of 1.5% in 2016, with business investment in machinery and equipment gradually replacing investment in the energy sector over the coming years. We forecast the weaker exchange rate and stronger US demand will see non-commodity goods exports rise and draw down inventories to an extent that businesses will step up their fixed investment in machinery and equipment,...
Canada Information Technology
BMI View: We downgraded the IT market forecast for Canada in the Q415 update to account for the economic slowdown envisaged by our in-house Country Risk team and now expect growth of 2.5% in 2015 and a CAGR of 3.4% to total sales of CAD64.4bn in 2019. Even before the downgrade the growth outlook was subdued owing to the maturity of the Canadian IT market, which prohibits the high growth rates observed in emerging markets during the period of rapid 'catch-up' growth, with IT hardware sales expected to underperform due to a slower rate of product innovation as compared to software and services. In the latter two segments we envisage...
BMI View: The Canadian construction industry will contract 0.5% in 2015 as cuts to private cap-ex in the primary sector and a H215 slowdown in residential construction weigh on growth. We expect the entire industry as a whole to recover in 2016, driven by the new Liberal government's fiscal stimulus plan, which will double public infrastructure spending over the next 10-years.
The Liberal government's victory in the October federal election is a win for infrastructure development. The Liberal fiscal stimulus plan will double public spending into infrastructure over the next 10 years.
The Liberal government also plans to create a Canada...
BMI View: Canada's insurance market is large and well developed, and benefits from the presence of some of the leading global insurers, particularly in the robust life sector. Supporting the insurance industry is a well-developed domestic financial market, access to international capital markets, and a strong regulatory environment which serve to make this an attractive investment destination. While currency fluctuations will result in short term declines in premiums when measured in US dollar terms, in local currency terms both the life and non-life sector will see sustained growth in premiums throughout our current forecast period through to 2019.
Canada Medical Devices
BMI Industry View : Canada has a sophisticated and well established medical device market which ranks ninth in the world in terms of value. The market is expected to grow at a CAGR of 4.0% over the 2014-2019 period. This steady growth should see the balance of trade deficit widen owing to Canada's reliance upon imports.
Headline Industry Forecasts
In 2014, the Canadian medical device was estimated at USD6,719.6mn, equal to per capita spending of USD189. This represents 3.5% of total health expenditure. Exchange rate fluctuations are giving a mixed picture of market performance, with growth...
BMI View: The Canadian metals sector will be supported in the years ahead by both an eventual recovery in domestic fixed asset investment and continued demand from US and Mexico. In particular, increasing manufacturing and industrial activity in the latter two countries should help drive demand for metal inputs. Continued weakening of the Canadian dollar against the US dollar should also support exports.
Stronger economic growth in both the US and Mexico over 2015, combined with a weaker Canadian dollar (CAD) in the coming quarters, will support growth in the Canadian metals sector to 2019. Indeed, we expect both the US and Mexico will experience positive trends in real GDP growth in the...
BMI View: Canada's mining sector will experience slow growth due to continued mineral price weakness. The country will remain a mining powerhouse, due to the country's vast mineral reserves and reputation as a world class destination for mining investment.
Oil & Gas
Canada Oil & Gas
BMI View: Our growth outlook for Canada's oil and gas industry remains modest given mounting headwinds in both the upstream and midstream sectors amid a lower oil price environment. The greatest threats to these projects are unfavourable project economics and regulatory headwinds that will hamper the growth of oil sands-driven production and LNG terminal development, weighing on total hydrocarbon output. This is exacerbated by the likely drop in exploratory activity throughout Canadian acreage as companies revise capital expenditures in the coming years, with reserves likely to suffer as a result...
The drive to diversify feedstock is the main focus of the Canadian petrochemicals sector as it seeks to meet the challenge posed by new shale-based capacity in the US. BMI's latest Canada Petrochemicals Report anticipates continued growth in output in the short term, but that market diversification will be crucial to the industry's long-term success.
Over the near term, the focus for the industry will be on Nova Chemicals' plans to expand ethylene and polyethylene (PE) capacity as part of its 'Nova 2020' growth strategy, which is making extensive use of exploiting unconventional gas deposits in North America. Nova is engaged in efforts to increase supply for its crackers in Corunna, Ontario and Joffre, Alberta. Meanwhile, the company is expanding PE production capacity with 430,000-500,000 tonnes per annum (tpa) of linear low-density PE due to come on stream in 2016 and the potential for a...
Pharmaceuticals & Healthcare
Canada Pharmaceuticals & Healthcare
BMI View: The second largest market in the Americas region, drugmakers operating in Canada will continue to benefit from high per capita spending on pharmaceuticals and rising public sector procurement as a result of the country's aging population. As such, in the near-term, drugmakers will continue to perceive strong rewards within a transparent and politically stable market. However, a high degree of public sector cost-cutting will, over the longer-term forcast horizon serve to gradually increase the uptake of generics and biosimilars and reduce overall industry value growth.
Headline Expenditure Projections
Pharmaceuticals: CAD22.93bn (USD20.75bn...
BMI View : The implementation of a significant pipeline of hydropower projects, coupled with increasing investment into natural gas-fired and non-hydro renewable power, will drive growth in power capacity and generation in Canada over the coming decade. We expect the role of coal-fired and nuclear power in the electricity mix to decrease over our 10-year forecast period as a result of stricter emission regulations and the planned retirement and refurbishment of existing nuclear reactors.
Key Trends And...
BMI View: The Canadian non-hydropower renewables sector is expected to see solid growth in 2015, with both wind and solar power seeing their capacity grow by 14% and almost 20% respectively. Overall, the Canadian renewables market continues to suffer from the lack of a coherent national strategy as well as the country's focus on the hydrocarbon sector. As the wider economic growth is also slowing, we expect growth rates in 2016 to be subdued, a trend we expect to continue throughout our forecast period until 2024. As such, we continue to doubt that Canada will achieve its self-imposed emission reduction targets.
Canada boasts vast potential for all types of renewable energy, as well as a national target to overcome coal fired electricity generation and reduce the country's overall emissions. However, the country also suffers from a...
BMI View: Falling exports as a result of declining oil prices and revenues have lead to currency devaluation and to a prolonged contraction in Canada's output over the last year. Nevertheless, household incomes are projected to grow in 2016-2019 thanks to rising employment and wages. The relative wealth of the Canadian consumer will continue to support stable and positive retail expansion and a diverse retail sector.
A sharp decline in Canada's export value caused by the oil price slump will be the key driver of the slowdown of the Canadian economy. We project that real GDP growth will decelerate from 2.5%...
BMI View: In Canada in 2016, we anticipate that the Port of Montreal will continue to lead in terms of growth at 4.90%, albeit a bit lower than 2015's estimate. The port of Prince Rupert will shorten its lead in terms of container throughput growth, with Metro Vancouver closing the gap. We forecast that there will be no negative growth figures in 2016 despite the knock-on effects of the slowdown in China and the possible repercussions on global economic instability.
Canada's economy looks set to benefit from trade with the US and increased deficit reduction in 2016, as investment in the country's shipping sector continues to strengthen its offering by enabling more...
BMI View: Following a series of high-profile spectrum auctions, subsequent spectrum trades and acquisitions, the Canadian market is set to resume its sedate pace of development. Although WIND Mobile is in a better position to become the country's long-awaited fourth national operator, its newfound private status means it may have neither the appetite or resources to capitalise on its circumstances. Meanwhile, established players remain focused on selling premium converged services .
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