OTTAWA — The final blast of major economic data before the federal election is out Friday and economists are predicting a “Raptors effect” may boost the numbers.
Statistics Canada will reveal updated numbers on the country’s economic growth. Good news gives bragging rights to the incumbent Liberal government, but even a sliver of bad news could allow the opposition parties to pounce, arguing the government has mismanaged the economy.
Economists and analysts polled by the National Post suggest that the numbers will likely be rosy — owing partly to the “Raptors effect” which juiced retail sales during the team’s playoff run.
Statistics Canada said a bump in sports merchandise in particular “coincided” with the Toronto Raptors playoff run, and gave a lift to overall retail spending numbers.
The results, whatever they show, could sharpen the divide between the two leading federal parties ahead of the election, as the Conservatives seek to tap into economic anxieties and the rising cost of living for voters and as the Liberals tout their purported record of stable economic growth.
But analysts warn that comforting economic figures could overshadow risks that lie ahead for Canada, particularly amid an ongoing trade battle between the U.S. and China that has sent stock markets tumbling.
“It certainly overstates the underlying strength of the economy,” said Sal Guatieri, senior economist at Bank of Montreal. “We’re not getting back to a 2017 three per cent growth rate — that’s just not in the cards for Canada.”
Economists widely expect to see three per cent growth in the second quarter of 2019, marking a significant uptick from the previous two quarters when the Canadian economy had essentially stalled. Averaged out over the past year, however, the country’s growth rate is closer to 1.5 per cent, or well below the Bank of Canada’s “target” two per cent rate.
And it could get worse. Repeated threats by U.S. President Donald Trump in recent weeks to level trade tariffs against China has sent the global economy into a tail spin, triggering a number of central banks to cut their rate —and in turn spurring recession fears.
“We can’t take too much comfort from where we are now, because we’re probably going to be going through a bit of a rough period,” said Jean-François Perrault, chief economist at Scotiabank.
Perrault was careful not to suggest Canada is inevitably heading toward a recession, but said increased trade tensions could continue to put a drag on the overall economy.
Even so, consumer spending levels in Canada have remained surprisingly resilient, outpacing analyst expectations for the month of June. Unemployment rates in Canada have also remained among the lowest in history.
Economic updates have a history of shaping past election campaigns.
Four years ago, as the 2015 election approached, the same GDP data gave Justin Trudeau’s Liberals the ammunition to argue that Canada was in a recession and that the country needed Trudeau’s plan to run deficits and juice the economy. Tom Mulcair’s NDP and Stephen Harper’s Conservatives both promised to balance the budget.
The economic situation now, with good numbers but an underlying cause for concern, is the inverse of the situation four years ago, where the numbers looked bad, but the experts were sanguine. In 2015, the numbers looked worse than they were and economists said it was a “technical recession,” rather than a true recession. After the election, Canada’s employment numbers remained mostly steady and the broader economy recovered quickly.
We can’t take too much comfort from where we are now, because we’re probably going to be going through a bit of a rough period
But the economic debate during the election campaign may came down to how voters feel, more than any specific economic indicator. A poll last month showed the issue that concerns most Canada is rising cost of living. Although inflation has been consistently low for years and the results of the poll confused some economists, it could be that issues like housing affordability in cities like Vancouver and Toronto were preying on the respondents’ minds.
It is already clear, though, that the parties will have no shortage of platform planks to address the economic concerns of voters. Andrew Scheer’s Conservatives have already introduced a plan to remove the GST on home heating and another to give a tax break on maternity leave benefits.
Earlier this week the party announced a campaign slogan that promised to help Canadians “get ahead” in world that is increasingly expensive for average-income families. In a campaign video posted to social media on Thursday, former prime minister Stephen Harper urged Canadians to vote for Scheer as a way to stem growing household costs.
“Paying the bills is getting harder and harder, as every essentials get more and more expensive,” Harper said.
Talking to reporters on Thursday, Prime Minister Justin Trudeau touted his government’s plans to spend on infrastructure projects across Canada, while also noting that some Canadians remain “concerned” about the broader economy.
“We have put in place a program to invest in Canadians, to invest in communities, to invest in partnership with the provinces,” he said.
A recent Nanos poll commissioned by Bloomberg News showed that Canadians are starting to break in favour of Trudeau on the question of who is the better steward of the economy. Until mid-July, that question had shown Trudeau neck-and-neck with Scheer, but the prime minister has recently begun to pull ahead.
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