Canada: Oil is not the only problem - Wells Fargo

Analysts from Wells Fargo, maintain their below-consensus forecast of a 1.0% GDP growth for Canada during 2016 and 1.6% in 2017.

Key Quotes:

“Due largely to an enormous drag from net exports, the Canadian economy contracted at an annualized rate of 1.6 percent in Q2. Canada initially demonstrated resilience in the face of steep price declines for oil and commodities.”

“Oil is not Canada's only problem either. At present, a combination of challenges stand in the way for Canada including a highly geared consumer, a lack of animal spirits in business spending and stubbornly slow GDP growth in the United States where Canada sends most of it its exports.”

“Canada’s -1.6 percent real GDP growth in Q2 was a gut-check, but the wildfires in Alberta were apredictable drag which will likely go away in coming quarters. More concerning, in our view, are the still-elevated levels of consumer debt and the recent slowing in the labor market.”

“We maintain our below-consensus forecast of slow GDP growth of 1.0 percent in 2016 and 1.6 percent in 2017. There could be near-term relief in store if exports bounce back in the third quarter and the prospect of stronger U.S. growth should underpin exports into next year.”