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.

Country Risk

Canada Country Risk

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Core Views

  • We are mindful of significant uncertainty facing Canada's economy in the next few years, as a patchy US recovery and a high reliance on oil-related investment point to considerable economic headwinds.

  • Canada's Liberal Party government will struggle to maintain its reform momentum over the coming years.

Key Forecast Changes

  • We have lowered our policy rate forecast to 1.00% from 1.25% by end-2017, as the central bank will be mindful of heighten global economic uncertainty.

  • We have revised up our average exchange rate forecast to CAD1.30/USD from CAD1.34/USD in 2016 and CAD1.29/USD from CAD1.34/USD in 2017 after upward revisions to our oil price outlook

Key Risks

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Canada Industry Coverage (21)

Agribusiness

Canada Agribusiness

BMI View:

BMI View : The Canadian grains and beef sectors will emerge as winners of the Trans-Pacific Partnership, and expanded export possibilities will deliver output stability out to 2020. However, beef production will be constrained due to cattle supply. The Canadian pork sector will remain stable, largely as demand for Canadian live swine to the US remains steady. The dairy sector will post lacklustre growth prospects, while the sugar industry remains under pressure from low prices and competes with global production from Brazil and Asia. Canadian sugar production will recover modestly in the face of low...

Autos

Canada Autos

BMI View:

BMI View: We now forecast light vehicle sales growth of 3.6% in 2016 which will take the market to another record. This means we now expect the market to contract in 2017 as this level of growth becomes hard to replicate in a mature market.

Passenger Car and Light Commercial Vehicle Sales
(2014-2020)
f = BMI forecast. Source: BMI, Industry Canada

Key Views

  • Light vehicle sales will grow 3.6% in 2016, led by a 12.0% increase in the light truck segment.

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Commercial Banking

Canada Commercial Banking

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Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

Defence & Security

Canada Defence & Security

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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

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BMI View: Canadian consumers face headwinds arising from high household indebtedness levels, rising housing prices as well as negative labour market trends. Taking into consideration the subdued overall country's economic situation, negatively affected by the lower oil price environment, we forecast Canada's food and drink industry to experience a slowdown over the coming year.

Food and Drink Spending
(2013-2020)
f = BMI forecast. Source: BMI, National Sources

Latest Updates...

Freight Transport

Canada Freight Transport

BMI View:

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:

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....

Information Technology

Canada Information Technology

BMI View:

BMI View: We forecast IT spending in Canada will increase at a CAGR of 3.8% over 2016-2020 to reach a total market value of CAD74.1bn. We expect the market to strengthen as Canadian economic growth picks up from 2017, and highlight the potential of the software and services segments where enterprise demand for the latest software and services including real-time enterprise software and services, big data analytics and cloud computing will outperform. 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....

Infrastructure

Canada Infrastructure

BMI View:

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....

Insurance

Canada Insurance

BMI View:

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.

Headline...

Medical Devices

Canada Medical Devices

BMI View:

BMI View : Canada has a sophisticated and well established medical device market which ranks eighth in the world in terms of value. We forecast that the market will register moderate growth in US dollar terms over the forecast period. This steady growth should see the balance of trade deficit widen owing to Canada's reliance upon imports.

Projected Medical Device Market...

Mining

Canada Mining

BMI View:

BMI View: Canada's mining industry value will continue on a multi-year downtrend, as miners remain focused on cutting costs and curbing output in a structurally lower commodity price environment. Nonetheless, the country will remain a major global mining industry, supported by vast reserves and a stable operating environment.

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Canada Mining Industry Value Forecast (2014-2020)
2014e 2015e 2016f 2017f

Oil & Gas

Canada Oil & Gas

BMI View:

BMI View: Our growth outlook for Canada's oil and gas industry remains modest given mounting headwinds in both the upstream and midstream sectors within a low commodity price environment. The greatest threats are unfavourable project economics and regulatory headwinds that will hamper the growth of oil sands-driven production beyond 2018, much-needed midstream expansions and LNG terminal development. This is exacerbated by the likely drop in exploratory activity...

Petrochemicals

Canada Petrochemicals

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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:

BMI View: Canada has a number of domestic pharmaceutical firms and is a major market for foreign-based companies. Despite the expanding implementation of cost-containment reforms and rising uptake of lower cost 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 CAD23.53bn (USD17.43bn) in 2016; +2.0% in local currency terms and -3.4% in US dollar terms. Forecast unchanged from previous quarter.

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Power

Canada Power

BMI View:

BMI View : Growth in the Canadian power sector will be driven by the implementation of a vast pipeline of hydropower projects, as well as political commitment to increasing the role of renewables and natural gas in the electricity mix. Weak growth in power consumption - compounded by the slump in oil prices - will limit renewables investment opportunities outside of public incentive schemes, but we see upside potential from ambitious renewables plans in Alberta and Saskatchewan.

Headline Power Forecasts (Canada 2014-2020)
2014e 2015e ...

Renewables

Canada Renewables

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Renewables Headline Forecasts (Canada 2015-2021)
2015e 2016f 2017f 2018f 2019f 2020f 2021f
e/f = BMI estimate/forecast. Source: National sources, BMI...

Retail

Canada Retail

BMI View:

BMI View: Stability will return to the Canadian economy and its retail sector in 2016. Household spending is set to stay flat as employment and wages begin to recover after adapting to the new situation in commodity markets. The weakened Canadian dollar will keep imported goods relatively more expensive; however, it will also attract more US tourists to shop for cheaper clothing and durables at least throughout the remainder of this year.

Headline Household Spending
(2014-2020)
...

Shipping

Canada Shipping

BMI View:

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...

Telecommunications

Canada Telecommunications

BMI View:

BMI View: If the deal between Bell and MTS is approved, we will see more consolidation in the Canadian telecoms market driven by the 'big three': Bell, Rogers and Telus. Scale is required to make necessary network investments, and the national mobile market is a core driver towards transforming the legacy provincial fixed market structure.

Latest Updates & Industry Developments

  • Approximately 988,720 new mobile subscriptions were added throughout 2015, taking the total to 29.4mn. This was better than expected and we forecast the figure to reach 29,7mn by the end 2016....

Tourism

Canada Tourism

BMI View:

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.

Key Forecasts (Canada 2013-2020)
2013e 2014e ...

Latest Canada Articles

  • We have left our corn forecasts unchanged despite recent price volatility. ...

  • An unsettled political and economic environment in the wake of the Brexit v...

  • We have slightly downgraded our 2016 Canadian crude production forecast to ...

Latest Canada Blogs

  • BMI Research has just published a special report looking at why pre-electio...

  • Global monetary policy dynamics are likely to be mixed over the coming year...

  • Expectations are mounting from some quarters that the Bank of England ...

Latest Canada Podcasts

  • The Trans-Pacific Partnership is a proposed trade agreement which woul...

  • Following the global financial crisis, when carmakers were forced to m...

  • BMI expects global mining M&A to pick up over the coming quarters....

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