Throughout the global economic crisis, Canada leaned on its own housing sector for growth. As the sector slows, it’s looking next door.
The Bank of Canada said Wednesday that a recovery in U.S. housing is giving a much-needed boost to the Canadian economy. And it couldn’t come at a better time. The central bank slashed its 2013 growth forecast for the Canadian economy to 1.5% from 2%, citing domestic factors like less-robust-than-expected business investment and slowing growth in household spending.
A U.S. housing sector that’s finally finding its feet is good news for Canada.
The Bank of Canada expects U.S. residential investment to expand at an annual average 12.5% over the 2013-15 period. “All else equal,” the central bank said, such an investment rate suggests an additional boost in Canadian export growth of about 1 percentage point a year, based on historical relationships.
“The higher income and wealth in the United States generated by the housing recovery will also lead to higher U.S. consumption, further raising demand for Canadian exports,” it said.
Much of the benefit of more American home-building and home-renovating will be felt by Canada’s beleaguered forestry industry.
Canadian lumber production has been bouncing back after being hard hit starting in 2006, when U.S. housing starts plunged. Recovering demand in the U.S. housing sector in the past year, the Bank of Canada said, sparked a 55% jump in lumber prices and sent them to their highest level since April 2005.
The price appreciation helped spark a terms-of-trade improvement for Canada as a net lumber exporter, driving up Canadians’ purchasing power and boosting forestry-sector profits. Production, employment, investment, wages and job creation have all advanced, the Bank noted.
The Real Estate Orange 