Canadian economic outlook: steady as she goes

There has been an ongoing debate in Canada about the state of Canada’s housing and construction markets that dates back to 2008 and the onset of the global economic recession that was precipitated by the so-called housing bubble.

The fact of the matter is that Canada endured that global recession relatively intact. Our own recession didn’t last long, and our housing and construction sectors bounced back rather strongly, and surpassed pre-recession levels very quickly.

An ongoing debate

In fact, our housing sector rebounded so well, and so quickly, that the debate over the onset of yet another housing bubble has raged ever since. That’s right. We’ve been talking about this for the better part of a decade.

So, who’s right? Is the housing bubble that some have predicted since shortly after 2008 finally set to come? Or is it steady-as-she goes for the foreseeable future.

As much as anybody in financial services likes to think he or she has a crystal ball. We don’t. However, what we can do is deal with the facts before us, and draw some conclusions as a result.

So far, so good

First, the predicted housing bubble has yet to occur. At the very least, this means that, up until now, the sector has been more stable than some predicted. That means something.

Some of this stability has come from the fact that investing in Canada’s residential sector has come from abroad, and not so much from domestic speculation. Despite some concern on this front, if this trend holds, the housing and construction sectors should be fine — for now.

Another signal can be ascertained from what the Bank of Canada is doing with interest rates. Despite speculation that the Bank was going to increase rates recently, in part to avoid the dreaded housing bubble, it’s steady-as-she goes with Canada’s central bank as its interest rate remains unchanged.

What does this mean? Well, according to the Bank itself, the Canadian economy is chugging along quite nicely — thank you very much — but not enough to start putting on the breaks quite yet. In typically Canadian fashion, we seem to be plodding our way ahead in a consistent and resolute fashion, which, for investors, probably means we should expect stability and predictability without any surprises for the foreseeable future.

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