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 negative impact of low oil prices on fixed investment in Canada will persist in 2016 to a greater extent than we had previously projected, prompting us to revise down our real GDP growth forecast for this year.
Expansionary fiscal measures outlined in the 2016 Budget on March 22 will see a significant widening of Canada's federal government budget deficit over the next two years. However, even though we see government debt climbing, it will remain very low by G7 standards, with only limited fallout for future borrowing costs.
Canada's governing Liberal party will continue to enjoy strong popular support as it proceeds with its socially-minded reform agenda at a time when the economy will continue recover gradually.
Key Forecast Changes
Canada Industry Coverage (29)
BMI View: We retain a positive outlook for the Canadian agricultural sector. The Canadian grains and beef sectors will be among the winners of the Trans-Pacific Partnership and these expanded export opportunities will support output growth to 2020. However, beef production will be constrained in the short term by tight cattle supplies. The dairy sector will witness less-than-spectacular growth over the course of our forecast period whereas the Canadian sugar production industry will be under pressure from low prices and global production from Brazil and Asia.
|Agribusiness Market Value|
|BMI Market Value By Commodity (2014-2020)|
BMI View: Light vehicle sales growth will be limited to 0.5% in 2016 as the slowdown in the hydrocarbon industry spills over to vehicle demand in some of the most oil heavy provinces. Production will be given a boost by the bigger than expected investment by FCA.
|Passenger Car And Light Commercial Vehicle Sales|
|f = BMI forecast. Source: Industry Canada, BMI|
Light vehicle sales will grow just 0.5% in 2016 as the effects of low oil prices start...
Canada Commercial Banking
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Defence & Security
Canada Defence & Security
BMI View: Canadian defence spending will be modest in 2016 but an improvement on the four consecutive years of negative growth the country has experienced since 2012. However, amid the government's ongoing fiscal consolidation program and budgetary limitations - not to mention the country's stable security landscape - we note that this forecast is likely to be revised downward. Indeed, despite the armed forces' requirements to replace ageing systems and renewed commitment towards developing the local industry, the funding available will instead mostly continue to be taken up by...
Food & Drink
Canada Food & Drink
BMI View: While 2015 marks the nadir of Canada's oil-related economic slowdown, we project a low average growth trajectory over the coming years. This is because despite early indications that a weaker exchange rate and stronger US demand are driving up vehicle and consumer goods exports, there are no signs of higher fixed investment into Canada's non-commodities sector thus far. We forecast average annual real GDP growth of 1.7% between 2015 and 2019, in contrast to an average growth rate of 2.5% in the preceding five years. 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...
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 Freight Transport
BMI View: We anticipate Canada's freight modes and shipping industry to grow in 2016 with road freight outpacing other modes while the country's largest container port, Port Metro Vancouver, will achieve the biggest increase in containers handled. Canada's strong ties with Europe and Asia will support the shipping sector while inland waterway freight posts slower growth. Well established trade links with Asia is also benefitting air freight as will the introduction of new air freight services to Latin America and Europe. The US remain Canada's major trade partner and a projected increase in US imports will boost both road and rail modes with the latter also encouraged by ongoing infrastructure investment. Total trade in 2016 will record healthy growth, driven mainly by a rise in exports, while existing and upcoming trade agreements support our positive outlook over the medium term....
Canada Information Technology
BMI View: Following a 2.5% increase in spending in 2015, we predict that IT spending in Canada will grow by 3.0% in 2016 to reach a total market value of CAD63.73bn in local currency terms. We believe that growth will be driven by the software and services market segments and, especially, enterprise demand for the latest software and services including real-time enterprise software and services, big data analytics and cloud computing. Although the hardware segment has limited growth prospects it should be noted that Canada is a highly lucrative market due to high per capita incomes and a consumer preference for premium devices. Therefore, although it will not offer unit and top-line financial growth prospects, it will continue to offer vendors an attractive market with wider margins than the likes of those in Latin America....
BMI View: The Canadian construction industry will recover in 2016 as the Liberal government spends big on infrastructure projects in a bid to stimulate the economy. However, we note downside risk to this forecast as the 2016 budget announced in March fell short of campaign promises.
Latest Updates And Structural Trends
We expect a recovery in the Canada construction industry in 2016, driven primarily by heightened public investment in infrastructure.
However, on the back of the release of the 2016 Budget, which falls short of campaign promises on tangible new infrastructure spending, we reduced our 2016 growth forecast. We also highlight the likelihood of further reductions to lofty goals, which will place downside risk to our strong outlook for the sector....
BMI View: We continue to hold a positive and stable outlook for the Canadian insurance industry. The Canadian insurance industry is large and well developed, and benefits from the presence of some of the leading global insurers, particularly robust in the life sector. The Canadian financial sector, supporting the insurance industry is well capitalized and robust. The regulatory environment supporting the Canadian insurance sector is strong and the industry also benefits from access to international capital markets which serve to make this an attractive investment destination. Nevertheless, currency fluctuations will result in short-term declines in premiums measured in US dollars. However, in local currency terms both the life and non-life sector will see sustained growth in premiums throughout our current forecast period through to 2020.
Canada Medical Devices
BMI View : Canada has a sophisticated and well established market which ranks eighth in the world in terms of value. We maintain that the market will grow at a CAGR of 4.0% in US dollar terms over the 2014-2019 period. This steady growth should see the balance of trade deficit widen owing to Canada's reliance upon imports.
BMI View: We have increased our 2016 tin price forecast to USD16,500/tonne owing to a stabilisation in the Chinese economy over Q116 that has boosted all industrial metal prices significantly over January-April. While we expect consolidation over the remainder of 2016, tin prices will continue to recover beyond 2016 as the global market posts sustained market deficits and inventories dwindle.
BMI view: We have revised our aluminium price forecast from USD1,575/tonne to USD1,600/tonne in 2016, as the tightening market provided an earlier than expected floor in Q116. Aluminium prices will gradually edge higher as the global market moves into a deficit by 2018.
BMI View: Nickel prices will bottom in 2016 as weak production drags the global market into deficit. For instance, we expect Chinese imports of nickel to grow over the coming quarters. Prices will begin 2016 weaker than we had previously expected and we have thus revised down our 2016 average price forecast to USD9,000/tonne from USD10,500/tonne.
BMI View: We have revised down our average copper price forecast for 2016 to USD4,900/tonne. We expect prices to find a floor over the first half of 2016, and begin to stabilise thereafter, supported by production cuts and modest consumption growth.
BMI View: We have raised our gold price forecast for 2016 to USD1,275/oz and have a new five-year price target of USD1,400/oz. We have turned more positive towards prices due to rising inflation pressures and our view that real rates will remain depressed in developed markets beyond 2016. A modest rise in prices will be insufficient to reverse the trend of weak mine investment and industry consolidation.
BMI View: Global steel prices will remain subdued due to a persistent steel oversupply over the coming quarters. From 2017 onwards, steel prices will gradually edge higher as the global steel surplus will narrow due to Chinese supply moderation.
BMI View: We maintain our average zinc price forecast for 2016 of USD1,750/tonne. We expect zinc prices to reach a floor over the first half of 2016, and begin to stabilise thereafter, as production cuts shift the market to a deficit.
BMI View: Lead prices will gradually edge higher as the global lead market will shift into deficit by 2017 as production growth will slow over the coming years.
BMI View: Canada's mining sector will continue to contract through 2017, due to structurally lower mineral prices. The country will remain a major mining industry in the Americas, returning to value growth beyond 2017 as prices stabilise and reinvigorate project 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 low 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 year...
Canada's petrochemicals industry saw mixed results in 2015 with a contraction in the value of basic chemicals sales, but strong growth in rubber and plastic production. While domestic petrochemicals consumption is expected to pick up in 2016, this could be offset by slower growth in Canada's main export market, the US. There are added challenges of carbon pricing and the declining competitiveness of Canada's ethane-fed industry relative to naphtha-based rivals in Europe and Asia. Nevertheless, in the long term, the availability of ethane derived from unconventional resources should drive petrochemicals investment.
In 9M15, the value of plastic products shipped rose 7.4% y-o-y while rubber rose 2.9% y-o-y. Chemical capacity utilisation rates averaged 84.3% in H115, up 8.7 percentage points (pp) over H114, while plastic and rubber rates were at 82.6% and 84.7%, up 4.2pp and 2.0pp respectively. Higher operating rates and...
Pharmaceuticals & Healthcare
Canada Pharmaceuticals & Healthcare
BMI View: Canada is a significant manufacturing base for pharmaceutical companies as well as a market in its own right. Despite the expanding implementation of cost-containment reforms and rising uptake of lower value generic drugs, the effects of these trends will be mitigated by rising demand for and consumption of high volumes of prescriptions, particularly high value personalised medicines.
Headline Expenditure Projections
Pharmaceuticals: CAD23.06bn (USD18.04bn) in 2015 to CAD23.52bn (USD17.42bn) in 2016; +2.0% in local currency terms and -3.4% in US dollar terms.
Healthcare: CAD217.54bn (USD170.13bn) in 2015 to CAD225.19bn (USD166.81bn) in 2016; +3.5% in local currency terms and -2.0% in US dollar terms....
BMI View : The election of Justin Trudeau as Canada's prime minister and the introduction of a strategy to curb carbon emissions in Alberta will strengthen Canada's shift away from coal-fired power and towards renewables and natural gas-fired power generation over the coming decade. Hydropower will remain the dominant technology in Canada's power mix through 2024, due to a vast pipeline of large-scale projects planned and under construction.
|e/f = BMI estimate/forecast. Source: EIA, National sources, BMI...|
BMI View: Despite further reductions in the price for oil, and its negative impact on Canada's export market, we expect to see Canada post real GDP growth of 1.8% in 2016. Household incomes are forecast to continue growing, with further improvements in employment rates and increasing wages. The Bank of Canada is likely to maintain the overnight rate of interest at 0.5% for the remainder of 2016, with inflation remaining comfortably within its target range. As a result, we expect Canada's dynamic retail sector to deliver positive expansion over the course of the year.
|Headline Household Spending|
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 .
|Organic Growth Elusive, Focus Now On Upselling|
|Canada Mobile Market Forecasts|
BMI View: A pickup in arrivals from the US will drive Canada's tourism market in 2016, with stronger US arrivals leading to an overall increase in visitors to Canada. We expect the hotels and hospitality sector to respond accordingly given already high levels of investment. We expect ongoing economic growth in the US to support tourism to Canada over the forecast period, ensuring ongoing expansion in the sector.