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
The collapse in global oil prices will see Canada's energy-related fixed investment fall and rising unemployment hurt household spending levels this year and next.
A sharp decline in goods imports and demand for personal travel services will largely offset the adverse effect of lower oil prices on Canadian crude exports this year, ensuring a continued narrowing of Canada's current account deficit.
The Canadian dollar will remain under considerable downside pressure as oil prices remain low and short-term interest rates in Canada and the US continue to diverge.
Key Forecast Changes
We have lowered our real GDP growth forecast from 2.1% to 1.5% in 2015 and see growth climbing to just 1.7% in 2016, from our previous forecast...
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)|
In the light vehicle segment, we maintain our view that light truck sales will continue to outperform passenger car sales in 2015, in a total market set to grow 2.7%. This is borne out by data for 4M15, which show a 0.8% year-on-year (y-o-y) contraction in passenger car sales, compared with a 6.9% y-o-y increase in light truck sales.
Despite the negative impact of lower oil prices on the country's oil and gas sector, momentum in the light truck segment will be sustained by an uptick in the construction industry, new model launches, and increased disposable income from lower fuel prices. As such we forecast for 5.0% growth for the light truck segment in 2015.
Conversely, we believe the passenger car segment will contract further as more fuel-efficient models become less of a priority for consumers. Within the passenger car segment, we see premium brands continuing to buck the downward trend, but overall car sales...
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: The collapse in global oil prices will see Canada's energy-related fixed investment fall and unemployment rise, which will hurt household spending levels this year and next. Our latest oil-price revisions have prompted us to downgrade Canada's real GDP growth forecast from 2.1% to 1.5% in 2015. Canadian households will - on balance- benefit from the decline in fuel prices, adding to their disposable income and limiting the downside to private consumption growth in the next two years. However, we have lowered our 2015 real private consumption growth forecast from 2.5% to 1.8%, as business sentiment and hiring expectations have moved decidedly lower.
Headline Industry Forecasts (local currency)
2015 per capita food consumption growth = +1.5% year-...
Canada Freight Transport
BMI View: We take a broadly positive view for the freight industry's outlook over the next five years, particularly road freight, for a number of reasons. Firstly, lower oil prices will reduce costs; and secondly, although the decline in prices is curtailing exports, we believe this will be countered by the uptick in manufactured goods exports. However, we hold a less positive stance with regards to the airfreight mode, which will see incremental growth at best.
Although falling fuel prices are, on balance, a boon for Canadian households, leading indicators, such as the Ivey purchasing managers' index (PMI) and the Royal Bank of Canada manufacturing PMI have all been trending decisively lower since the end of 2014, each coming in below 50 (47.9 and 48.9 in March respectively), indicating a contraction. Coupled...
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: Canada's construction sector recorded overall growth of 0.69% in 2014, broadly in line with our expectations for industry expansion over the year. Although the fall in global oil prices is weighing heavily on oil sector investment, we do expect to see overall growth in the Canadian infrastructure value in 2015, due primarily to an uptick in residential construction and a considerable road, rail and renewables project pipeline. Overall, however, our outlook for infrastructure investment remains subdued, with limited annual growth expected throughout the forecast period.
Key Forecasts and Developments Include:
Delays to controversial pipeline projects continue, with TransCanada's Energy East Pipeline recently delayed by a year, while the...
BMI View: Currency movements will constrain the development of premiums in USD terms in 2015. There are factors which will boost premiums (in CAD terms at least) in both major segments through 2015 and the remainder of the forecast period. These include the continuing expansion of the economy and the ability of Canada's world class insurers to develop and distribute innovative solutions. Nevertheless, there are factors (such as the financial preparedness of the vast majority of households for retirement) and demographics which make it unlikely that life premiums will rise faster than at mid-single digit rates. In the non-life segment, growth is being held back by the downwards pressure on prices (and claims costs) in Ontario's motor vehicle insurance market. It is also being held back by competition in the market...
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 faces significant short-term headwinds that stand to curtail growth in output of key commodities such as gold and iron ore over 2015. At the top of the list is a strengthening US dollar which, combined with other factors, will see prices of several major commodities continue to depreciate over the coming months. Longer term, we expect Canada's diversified metals based and well developed capital markets to ensure it remains a top source of metals and financing, respectively.
Falling global commodity prices will present the main challenge to Canada's mining sector over 2015 with junior miners in particular struggling against narrowing margins. As such, output in many core mining segments, including gold and iron ore, will be sustained increasingly by larger multinationals with greater economies of scale. We expect gold prices in particular...
Oil & Gas
Canada Oil & Gas
BMI View: Our growth outlook for Canada's oil and gas industry has grown increasingly modest over the past several quarters 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 could 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: Canada will continue to support markedly above regional average rewards for drugmakers well into the forecast period. Rising consumption of high value pharmaceuticals and biologics stems from a mature population with above OECD average disposal income and a high incidence of chronic non-communicable disease. However, growing patient, prescriber and regulatory acceptance of biosimilar treatments will serve to significantly threaten the trajectory of modest growth into which Canadian pharmaceutical sales value had settled.
Headline Expenditure Projections
Pharmaceuticals: CAD22.9bn (USD20.75bn) in 2014 to CAD23.39bn (USD19.49bn) in 2015; +2.0% in local currency terms and -6.1% in US dollar terms. Forecast revised down from...
BMI View : We maintain our overall positive outlook for the Canadian power sector, based on Canada's robust macroeconomic trajectory, vast hydropower project pipeline and growing focus on natural gas-fired power and new transmission lines to export excess power to the US. While the renewables sector will continue growing in provinces which offer incentives to developers, coal-fired and nuclear generation...
BMI View: Although the Canadian non-hydropower renewables market continues to suffer from the lack of a coherent national strategy as well as the country's ongoing focus on the hydrocarbon sector, both wind and solar power generation capacity has been growing steadily in 2015. As Canada crossed the 10-gigawatt (GW) mark in wind power capacity in June, the country is on schedule for reaching the 11GW mark by the end of this year. Similarly, solar power is expected to experience some 28% growth this year. However, in the long run, we continue to doubt that Canada will achieve its self-imposed emission reduction targets and also had to revise down our...
BMI View: The retail market in Canada is well developed, with retailers benefiting from the high proportion of mid and high income households, with disposable income for spending on non-essential items, and proximity to major markets in the USA. Although we do expect to see overall growth in the retail sector by the end of the current forecast period in 2019, there are headwinds to growth including a weakening Canadian dollar and high rates of household debt which could undermine consumer confidence.
The ongoing rebalancing of the domestic economy and the fall in oil revenues will impact upon GDP growth in Canada, and as such we expect real GDP growth to slow to 2.1% in 2015, down from an estimated 2.4% in 2014, and to accelerate only gradually to 2.3% in 2016 (we see long-term trend...
BMI View: The narrowing of Canada's current account deficit will continue over the coming years, aided by sharp exchange rate depreciation and improving economic conditions in the US. Lower oil prices will curtail export growth 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.
Based purely on annual growth, rather than total tonnage handled, the shipping industry's outperformer in 2015 is set to be the Port of Montreal (5.62% year-on-year gains) in tonnage terms and the Port of Prince Rupert in box terms (an impressive 16.24% increase).
Headline Industry Data
Port Metro Vancouver tonnage throughput...
BMI View: The regulator has blocked attempts by Rogers , Bell Wireless and Telus to acquire the smaller players in the market, such as WIND and Mobilicity , resulting in the new entrants struggling to remain afloat and offer challenge to three established operator. I n this environment BMI believes it to be unlikely that a fourth large operator will emerge. In the frequency auction in March 2015, WIND, Eastlink and...