RBC economist Claire Fan discusses the positive factors driving Canada's domestic economy, including recent interest rate cuts and a rebound in retail sales. However, she also highlights the risk posed by potential tariffs on Canadian goods by the U.S. and the uncertainty surrounding their impact.
As Canada navigates the potential threat of a trade war with the United States, an economist with RBC suggests a cautiously optimistic outlook for the domestic economy. Claire Fan, speaking to BNN Bloomberg on Thursday, highlighted the positive impact of recent interest rate cuts by the Bank of Canada , which have eased financial pressures on both Canadian households and businesses.
She anticipates that these cuts, which are expected to continue into 2025, will further bolster economic activity.Fan pointed to stabilizing retail spending patterns as another encouraging sign. While November sales figures remained relatively flat compared to October, a preliminary estimate for December suggests a significant rebound. Fan attributes this shift to consumers strategically delaying their holiday purchases until after the federal GST holiday came into effect in December. The noticeable increase in December spending indicates that consumers were postponing purchases rather than experiencing a decline in overall spending trends.Despite these positive developments, Fan acknowledges that the looming threat of tariffs imposed by U.S. President Donald Trump remains a significant concern. The potential for 25 percent tariffs on Canadian goods entering the U.S. could disrupt trade and dampen business investment. Fan emphasizes the uncertainty surrounding these tariffs, stating that their potential impact is already affecting business decisions. However, she believes that the Bank of Canada's commitment to further rate cuts will help to mitigate these risks and support a brighter economic outlook for Canada in 2025
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