{"id":67,"date":"2019-01-03T13:00:52","date_gmt":"2019-01-03T13:00:52","guid":{"rendered":"https:\/\/www.rbc.com\/en\/economics\/2019\/01\/03\/happy-new-year-2019-will-put-canadas-economy-to-the-test\/"},"modified":"2025-03-31T02:12:30","modified_gmt":"2025-03-31T02:12:30","slug":"happy-new-year-2019-will-put-canadas-economy-to-the-test","status":"publish","type":"post","link":"https:\/\/www.rbc.com\/en\/economics\/canadian-analysis\/featured-analysis\/insights\/happy-new-year-2019-will-put-canadas-economy-to-the-test\/","title":{"rendered":"Happy New Year? 2019 Will Put Canada\u2019s Economy to the Test"},"content":{"rendered":"<p>Will the new year bring new resolve? Or new fear?<\/p>\n<p>A little of both, most likely, but we think there&#8217;s still hope for some good times ahead.<\/p>\n<p>At RBC Economics, we used the recent market volatility to step back and look at some of the bigger trends that may shape 2019 and beyond. Our report, <i><a href=\"https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/4\/2024\/11\/RBC-Economics-outlook2019.pdf\">Navigating 2019<\/a><\/i>, offers hope for a continued expansion, although we still harbour concerns over trade and investment.<\/p>\n<p>Here are the trends we think will shape the year ahead:<\/p>\n<h4>1. A Consumer Squeeze.<\/h4>\n<p>How will rising interest rates impact heavily-indebted consumers? A lot. With two rate hikes expected in 2019, <b>the average household will pay $1,000 more to service its debts<\/b>. Some good news: we expect household incomes to rise more than that. But let&#8217;s not get too Pollyannaish. <b>Expect some belt-tightening in 2019<\/b> as households cut back on big ticket purchases like new cars and trucks.<\/p>\n<h4>2. Stronger Housing Prices.<\/h4>\n<p>Low interest rates went hand-in-hand with rising house prices. But just because rates are now rising, don&#8217;t expect a major decline in 2019. <b>We see prices in Canada&#8217;s major cities holding steady in 2019<\/b>, thanks to Canada&#8217;s lowest unemployment rate in more than 40 years and the fastest-growing population in the G7. A soft landing is in the cards. Not welcome news for potential homebuyers, as <b>affordability will only worsen<\/b> in the year ahead.<\/p>\n<h4>3. More Labour Shortages.<\/h4>\n<p>They&#8217;re here to stay. Tough for employers, and good news for job-seekers, especially highly skilled ones. Many employees this year may be enticed to demand pay increases \u2013 a rarity in recent years \u2013 or switch employers to get the same result. Employers should start thinking long-term about staffing needs. Through the 2020s,<b> more than 270,000 people are expected to retire<\/b> \u2013 every year.<\/p>\n<h4>4. More Government Debt.<\/h4>\n<p>Households aren&#8217;t the only ones carrying big debt loads. Governments will also see their spending options dwindle as rates rise. Over the next half decade, <b>debt charges will be the second fastest-growing spending item for the federal government<\/b>, after seniors&#8217; benefits.<\/p>\n<h4>5. Better Oil Market Conditions.<\/h4>\n<p>In the energy sector, <b>the price gap between Canadian and international oil that dominated headlines last year will be smaller<\/b> <b>in 2019,<\/b> after the Alberta government&#8217;s production cuts and purchase of rail cars to ship crude.<\/p>\n<h4>6. Better Business Conditions.<\/h4>\n<p>Can Canadian businesses compete on the world stage? The answer has tended to revolve around taxes, but an equal challenge may be red tape. Consider this: It takes longer to get construction permits in Canada than in any other G7 country. Ottawa&#8217;s Fall Economic Statement included both tax measures and a deregulation plan. If there&#8217;s progress on the latter, <b>it could go a long way to closing Canada&#8217;s competitiveness gap<\/b>.<\/p>\n<h4>7. Trading Hope.<\/h4>\n<p>Trade tensions between the U.S. and China will loom large over the global economy, with Canada caught in the crossfire. As worrisome as that bigger dispute may be, we shouldn&#8217;t lose sight of the fact it touches only a small fraction of total trade for the U.S. and China. Of course, a full-blown trade war would lead to more stock market volatility, more uncertainty over business investment, and potentially higher prices for consumers. Anything less won&#8217;t eat heavily into global growth.<\/p>\n<div class=\"rds-callout-white\" style=\"border: 1px solid #c4c8cc;\">\n<div class=\"rds-gcw\">\n<div class=\"img mob-w-100\" style=\"display: inline-block; vertical-align: top;\"><img decoding=\"async\" src=\"\/wp-content\/uploads\/download-2019-economic-outlook.jpg\" \/><\/div>\n<div class=\"rds-inline pad-hlf\" style=\"display: inline-block; vertical-align: top;\">\n<h4 class=\"mar-t\">Read the Full Report<\/h4>\n<p><a class=\"btn tertiary\" role=\"button\" href=\"https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/4\/2024\/11\/RBC-Economics-outlook2019.pdf?_ga=2.163161013.860466636.1571330560-1577137382.1571330560\" target=\"_blank\" rel=\"noopener noreferrer\" ga-on=\"click\" ga-event-category=\"Economics\" ga-event-action=\"mid-funnel click\" ga-event-label=\"2019 economic outlook PDF dl-197320\">Download<\/a><\/p>\n<\/div>\n<\/div>\n<\/div>\n<p>\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"<p>What will 2019 bring for the Canadian economy? RBC Economics&#8217; latest report, Navigating 2019, explores the bigger trends that may shape the year and beyond.<\/p>\n","protected":false},"author":209,"featured_media":64,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"advgb_blocks_editor_width":"","advgb_blocks_columns_visual_guide":"","footnotes":""},"categories":[83,82,84],"tags":[11,17],"class_list":["post-67","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-canadian-analysis","category-featured-analysis","category-insights","tag-economy","tag-housing"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.7 (Yoast SEO v26.8) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Happy New Year? 2019 Will Put Canada\u2019s Economy to the Test - RBC Economics<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.rbc.com\/en\/economics\/canadian-analysis\/featured-analysis\/insights\/happy-new-year-2019-will-put-canadas-economy-to-the-test\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Happy New Year? 2019 Will Put Canada\u2019s Economy to the Test\" \/>\n<meta property=\"og:description\" content=\"What will 2019 bring for the Canadian economy? 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