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
There is a high likelihood of a coalition government being formed after this year's federal general election, after a surge in support for the NDP.
Lower investment in the energy sector will lead to weaker average real GDP growth over the coming years, particularly in the absence of higher manufacturing activity.
The prospect of a technical recession and below-target inflation suggest that the Bank of Canada is not done with monetary easing. We see another 25bps interest rate cut to 0.50% this year.
Key Forecast Changes
No major forecast changes have been made this quarter.
Key Risks To Outlook
High household leverage and continued housing...
Canada Industry Coverage (20)
BMI View: Canada will post a moderate increase in grains production in 2015/16, because the area planted will increase as available land recovers from being inaccessible for plantings last year. The country's poultry 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. We believe that Canada's milk supply management system will remain for the foreseeable future.
|Agribusiness Market Value|
|BMI Market Value By Commodity (2011-2019)|
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 a broadly healthy growth rate across the Canadian freight industry over the short and medium term, with rail set to be the outperformer in 2015. Key factors underlining our freight forecasts include the lower oil prices that will reduce fuel costs across the mix, as well as stimulate consumer demand as domestic consumers have more money in their pockets due to cheaper prices at the pumps.
We forecast real GDP growth of 1.5% in 2015, which will mark a trough for Canada's economy. Over the next several years, business investment in machinery and equipment will gradually replace investment in the energy sector. We also believe it will be some time before the weaker exchange rate and stronger US demand will see non-commodity goods exports rise and draw down inventories to an extent that businesses would step up their fixed investment in machinery and equipment, which...
Canada Information Technology
BMI View: The maturity of the Canadian IT market prohibits the high growth rates observed in emerging markets during the period of rapid 'catch-up' growth, but it nonetheless remains a highly lucrative market for vendors in per capita spending terms. Despite the fact that PC hardware prices have declined, Canada will continue to be one of the most lucrative markets globally in terms of spending per capita, with consumers exhibiting a strong preference for premium hardware. There are also areas of enterprise spending outperformance, including ...
BMI View: The Canadian construction industry will return to a relatively higher level of growth in 2015, due primarily to an uptick in residential construction and a considerable transport project pipeline, especially in the rail sector. Overall, however, our outlook for infrastructure investment remains subdued, with limited annual growth expected throughout the forecast period.
Key Forecasts And Developments
Delays to controversial pipeline projects continue, with TransCanada's Energy East Pipeline recently delayed by a year, while the preferred oil export terminal site was scrapped due to environmental concerns.
The rail segment remains strongest within the transport infrastructure sector, with growth of 5.8% forecast in 2015...
BMI View: The Canadian insurance market is among the largest and most developed of those we monitor and is home to some of the most recognised brands in the world. The development of the sector has been accelerated by the robust nature of the Canadian financial services sector and wider economy, both of which made it through the global financial crisis relatively unscathed compared to the US and major European economies. While intense brand competition coupled with high levels of penetration and density will limit the pace of growth in insurance premiums over the next few years, we are confident that major segments will be able to sustain a steady, single-digit level of expansion through to end-2019 and beyond.
Both the life and non-life strands of Canada's insurance markets are extremely developed, playing host to a number of world-class...
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 2013-2018 period. This steady growth 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 USD6.8bn, equal to USD195 per capita. The market is projected...
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 continue to feel the full force of the depression in global commodities markets over the coming quarters with the major mining groups for the most part retaining a conservative approach with regards to capacity levels and new investment. However, we believe the country is well placed to meet the upside when it comes, due to its well earned reputation as a world class destination for mining investment.
By most measures, Canada's mining industry is among the largest and most developed in the world with the country boasting extensive mineral minerals and metals resources that include sizeable precious metals deposits as well as large reserves of copper, nickel, zinc and iron ore. Miners are supported by a strong regulatory framework and world class infrastructure, while enjoying excellent access to capital and labour. As a consequence, the...
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: The global decline of oil prices is impacting the Canadian economy in 2015. Falling exports led to a prolonged contraction in the country's output which has been shrinking for every month between February and June 2015 and this trend is likely to continue over the next few months as the economy continues to adjust. Nevertheless, household incomes are projected to grow in 2016-2019 thanks to rising employment and wages. Wealthy Canadian consumers will continue to support a diverse retail sector.
A sharp decline in...
BMI View: In 2015, we anticipate a somewhat mixed bag in terms of performance across Canada's main ports. Leading the way in terms of y-o-y tonnage growth is set to be the Port of Montreal with growth of 5.66% pencilled in. In the box sphere, the Port of Prince Rupert is set to be the outperformer with very impressive growth of 36.24%, although the port does start from a lower base than the ports of Vancouver and Montreal. Lower oil prices are set to curtail export growth in Canada in 2015, which will hold back the country's shipping industry somewhat, but manufactured goods exports will increasingly pick up the slack, ensuring a secular decline of the current account shortfall.
Major currency depreciation and the...
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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