The economy in Canada is performing much better than the one of the USA. It has been progressing at a rate of 2.8% in 2006. Nevertheless, GDP growth has lost moderately in speed this year, advancing at an estimated rate of 2.5%.
Personal income rose at a healthy pace of 6.1% last year. In conjunction with the US slowdown, it decelerated to about 5.0% this year and is likely to stay at this pace in 2008. Much of the growth impetus goes on account of higher prices. If the impact of inflation and taxes is eliminated, the performance is more modest. Growth of real disposable income in 2006 was 4.9% and for 2007 and 2008 we estimate rates of only 3.5% and 2.8% respectively. This disappointing performance will be in spite of the promised income tax cuts by the government.
The Canadian residential housing market was still healthy in 2006. It advanced by 2.1% (on a value basis), down from 3.5% the year before. However, the market is saturated now and demand is waning. We predict a 1.6% growth rate this year and only 0.9% in 2008. If mortgage rates should climb it may even be negative. In unit terms, this represents a drop from 228,000 in 2006 to 215,000 this year and 190,000 next year.
Canadian consumer spending is an important positive force contributing to the economy’s overall growth. It rose at an annual rate of 4.0% during the past two years. Due to the slowing economy, we anticipate a growth rate of 3.9% in 2007 and 3.2% in 2008.
Expenditures for durable consumer goods (which includes furniture) are quite buoyant. Growth will likely come in at a healthy 7.9% this year up from 7.1% in 2006. However, as consumer confidence is declining, we expect durable consumer good sales to advance by only 3.7% next year, and possibly as low as 3.0% in 2009.
The Canadian furniture market (at retail prices) has been advancing continuously since the third quarter of 2002. Growth stood at 9.4% in 2006. For 2007, we predict a slowdown to a rate of 5.3%, and for 2008 a rate in the 5.6% range. The size of the Canadian furniture market in 2006 stood at
C$ 11,078 million (evaluated at retail prices) and if our growth predictions are correct, the market valuation will reach approximately C$ 11,667 million this year and C$ 12,324 million in 2008.