Will feds’ fall fiscal update respond to Canada’s competitiveness woes?

By Staff | November 16, 2018 | Last updated on November 16, 2018
2 min read
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When federal Finance Minister Bill Morneau delivers the fall fiscal update on Wednesday, some hope he’ll present measures to address concerns about Canada’s competitiveness.

In particular, markets are watching for a “made-in-Canada version” of the accelerated depreciation allowances provided to American corporates undertaking capital investments in the U.S., says CIBC chief economist Avery Shenfeld in a weekly economics report.

He adds, however, that recent comments suggest the government won’t match the 100% bonus depreciation available in the U.S.

If the government were to come through on capital depreciation stimulus, fiscal policy might not be a net tailwind for Canada in 2019, says Shenfeld, as infrastructure spending is lagging.

“In trying to spend wisely, and in concert with other levels of government, it’s taking longer to get the funds out the door and the shovels into the ground,” says Shenfeld.

Plus, the government might want to save fiscal room against deficit targets as it nears next fall’s election, he says.

Shenfeld also points out that some of the provinces have significant deficits or debt to address, accounting in large part for the country’s overall fiscal situation.

If the fall fiscal update doesn’t provide spending or tax stimulus, the Bank of Canada will have a reason to take a more cautious approach with monetary policy, he concludes.

Economic data to watch this week

National Bank doesn’t expect any surprises Friday when October’s price index is released, the bank says in a weekly economics report.

“A larger-than-usual decline in gasoline prices could have kept headline prices stable from one month to the other (not seasonally adjusted),” says the report. “This would allow the annual inflation rate to remain unchanged at 2.2%.” The bank also expects CPI-common to be unchanged at 1.9%.

In the U.S., housing starts data will be available on Tuesday. Along with housing starts, building permits may have increased in October, boosted by a resurgence in the multi-unit segment, says National Bank.

Also, U.S. durable goods orders may disappoint on Wednesday thanks to a decline in the aircraft component, says the CIBC report.

For more details, read the full reports from CIBC and National Bank.

Advisor.ca staff


The staff of Advisor.ca have been covering news for financial advisors since 1998.