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Canadian outlook downgraded on resource weakness: CIBC

Accelerated layoffs in the sector and oil's further plunge put more downward pressure on Canadian GDP

TORONTO, Jan. 28, 2016 /CNW/ - Anemic job growth, trouble in the oil patch and a fragile resource sector have led to a winter of discontent for the Canadian economy, as this year's real GDP growth is likely to come in at 1.3 per cent according to a revised economic forecast from CIBC World Markets.

The downgraded outlook for Canada's exposed economy points to more pain for an already strained labour market, even after factoring in an additional $10 billion in stimulus spending, a $30 billion federal deficit and a slightly weaker track for the Canadian dollar.

"While the country's GDP is less heavily weighted to resource sector spending than it was a year ago, we're only in the early stages of the negative spillover effects on other sectors," says Avery Shenfeld, Chief Economist, at CIBC, in the report Economic Insights: The Winter of our Discontent. "What's added to the downdraft on Canada, and on asset markets, is the discontent in investor sentiment globally including a sharp retreat in equities, rising corporate and provincial bond spreads, a flatter U.S. Treasuries curve, and a build-up of cash in Canadian households."

Looking beyond the very near future, Mr. Shenfeld says there are good reasons not to "overdose on pessimism", led by continued growth in the U.S. "You don't get the hiring of hundreds of thousands of new workers without a degree of optimism among employers, and the U.S. shrugged off a similar malaise in factory output and exports during the Asian crisis of 1998."

While official growth in China continues to decelerate he believes that economy could surprise to the upside while other emerging markets should see an upturn this year. Paired with added modest acceleration in Europe, these trends can point to an overall improvement in global growth in 2017.

He also expects commodities prices to rebound, albeit modestly, in 2016. "With supply finally starting to fall off in some areas, modest price recoveries should be in the cards as the market eyes brighter days in 2017."

While a more balanced view of the world should appear in the coming months, Canada's economy will continue to be sluggish,  but as Mr. Shenfeld notes, "markets price out the possibility of another rate cut and oil prices start to recover in the second half of the year, we look for the Canadian dollar to recover to 75 cents by year-end."

The complete CIBC World Markets report is available at:

About CIBC
CIBC is a leading Canadian-based financial institution with 11 million individual, small business, commercial, corporate and institutional clients and three major business units – Retail and Business Banking, Wealth Management and Capital Markets. CIBC Capital Markets provides integrated global markets products and services, corporate and investment banking, and top-ranked research to corporate, government and institutional clients around the world. Visit for more information on CIBC and CIBC Capital Markets. News releases are available at

SOURCE CIBC World Markets

For further information: Avery Shenfeld, Chief Economist, CIBC at 416-594-7356, or Olga Petrycki, Director, External Communications, 416-306-9760,