A Look At Canadian Growth

By Yaser Anwar, CSC of Equity Investment Ideas

• Growth prospects remain brightest in Western Canada, aided by a still-buoyant outlook for global resource demand. Net energy exports already account for Canada’s entire nominal trade surplus, and Canada’s role as an energy superpower will be further cemented in coming years, as significant investments in the oil sands enable oil production to ramp up. Also, risks to economic growth and inflation remain highly regionalized.
• With incomes soaring, domestic demand in Alberta has been superheated leading to a notable pick up in inflation. Headline CPI in that province is now running more than twice as fast as the national average.
• For non-resource manufacturers, tepid US demand represents a stumbling block to growth, exacerbating the strain caused by past currency appreciation. However, more recently investors got some reassurance from the US non-manufacturing sector. The ISM’s non-manufacturing index came in at a reading of 59, better than the 57 reading that had been expected and indicating continued expansion in the service sector.
• In general, the manufacturing industry’s disproportionately heavy weight in Ontario and Québec means those provinces have much more to lose from further factory sector weakness.
• Canada’s ongoing industrial re-alignment, towards energy and other commodities, and away from nonresource manufacturing, will continue to have significant implications for regional economic performance, with sizeable disparities in provincial economic growth expected to persist.
• One way investors can profit of Canadian growth is the ETF EWC. The underlying holdings represent some of the finest names in the TSX and gives you good diversification among sectors. From Banking to Oil/NG and Gold to Transports, i.e. RBC, Suncor/Encana, Barrick & Canadian Railway.

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