If NAFTA talks turn ugly, economic cooling could turn into a deep freeze

Posted by on Aug 20, 2017 in Bank of Canada, economic indicators, Economy, NAFTA, News, Press Releases, Trade |

By Gordon Isfeld OTTAWA – By the time the most recent economic readings are published, they could already be relegated to the history bin. That’s not only because of the usual lag in data gathering, it’s also a matter of number-crunching being overtaken by political events. Case in point: The current negotiating process between Canada, the United States and Mexico to determine the future of continental trade. As the playing fields change, so too will the economic numbers for each nation. By what degree remains unknown.     Initial talks began last week in Washington aimed at drastically revamping the nearly quarter-century-old North American Free Trade Agreement. It is expected to run through December, with Mexico hosting the next round and Canada taking the lead sometime later. How that process will unfold is anyone’s guess. But one thing is for certain, the revamped NAFTA will be born into a new economic world, if already weakening signs of growth and trends in history are any indication.  American dairy divided: Some want Canada's supply management left alone in NAFTAAlberta trade minister says NAFTA talks no threat to oil and gas industry “Is it conceivable that the (Canadian) economy will start to slow down in 2018? I would think it could,” said Ian Lee, a business professor at Carlton University in Ottawa. “I’m not saying there’s going to be a recession in 2018. I’m just saying no one is discussing (the possibility),” he said. “It’s a possibility, in the background, that we could see a slowing in the fall or the winter coming up.” In fact, there are already signs the economy is cooling.  Last week, Statistics Canada reported the manufacturing sector went into reverse during June, with sales contracting by 1.8 per cent after three straight months of gains. The declines were focused mainly on petroleum and coal products, along with a drop in purchases of transportation equipment and weaker activity in the chemical products sector, the agency said Thursday. That’s a tough turn for manufacturers who have spent the better part of the post-2008-09 recession struggling with market losses and plant closures. On Friday, StatsCan reported that consumer prices — the Bank of Canada’s key mandate concern — remained fairly tame in June, rising by 1.2 per cent on a year-over-year basis, up slightly from one per cent the previous month. Given the modest increase in inflation, the central bank has little need at the moment to consider another hike in interest rates and will likely hold off until at least October, barring a major shock to the economy. Feeding into those numbers will be StatsCan’s retail sales report for June, to be released Tuesday. Forecasters are calling for an advance of...

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