A seasoned economist from Bay Street has voiced concerns about the state of the Canadian economy, suggesting it's "pretty well flat on its back." David Rosenberg, the founder and president of Rosenberg Research, emphasized that Canada's economic growth has slowed significantly, contrasting sharply with the robust expansion in the United States.
Rosenberg highlighted that while the U.S. economy is seeing growth rates exceeding three percent annually, Canada's real GDP growth stands at a mere 0.9 percent. Adjusting for population growth, this indicates a worrying decline in economic activity on a per capita basis.
Despite acknowledging the shift from excess demand to excess supply, the Bank of Canada has refrained from lowering interest rates, prompting Rosenberg to question their stance. He emphasized the urgency for action, suggesting that waiting for cues from the U.S. Federal Reserve might not be prudent given Canada's unique economic dynamics.
Recent economic indicators, such as the substantial trade deficit in March and lackluster GDP data for February and March, further underline the economic challenges facing Canada. These developments have led many economists to anticipate a rate cut by the Bank of Canada in June.
However, there are divergent views among economists regarding the timing and extent of rate cuts, with some urging caution due to inflation concerns in the United States. Rosenberg countered these concerns, highlighting differences in how Canada measures inflation compared to the U.S. He argued that Canada's inflation levels, when adjusted, align closely with the Bank of Canada's target.
Moreover, Rosenberg cautioned that delaying rate cuts could necessitate more aggressive actions in the future, potentially exerting downward pressure on the Canadian dollar. He warned that prolonged inaction could exacerbate disinflationary pressures, necessitating significant efforts from the Bank of Canada to stimulate the economy.
In summary, Rosenberg's remarks underscore the challenges facing the Canadian economy and the need for proactive measures to address its sluggish growth and inflation concerns.
