Other economic indicators
Keep abreast of key economic indicators.
American economy
Updated December 10, 2024
Optimistic outlook for the U.S. economy in 2025
The U.S. economy is still in good shape, with third-quarter growth reaching 2.8% and fourth-quarter indicators pointing to growth of 3.2%. This trend is set to continue into 2025. The policy changes proposed by the new administration should not substantially alter the trajectory of the economy or monetary policy, but risks of higher inflation due to tariffs could limit growth prospects.
The impact on your business
- Strong consumer spending will continue to drive growth in the U.S., which could boost demand for Canadian goods and services, particularly in sectors such as retail and manufacturing.
- Canadian companies could benefit from increased demand for their exports. However, the potential imposition of import tariffs could disrupt supply chains and raise costs.
- Promising prospects in the U.S. open the door to investment opportunities, particularly in cross-border projects.
Proven strategies
- If you're worried about tariffs, check out Canada Tariff Finder , a free online tool that enables Canadian exporters to find out the tariffs applicable to a specific product in a foreign market.
- If you're thinking of expanding your business in the U.S.: 4 tips for successfully exporting your services
Oil market
Updated December 10, 2024
Oil prices set to remain low in 2025
Economic uncertainty is still very much with us in the oil market and is set to continue into 2025. Many economies are expected to experience stronger economic growth in 2025, but the uncertainty engendered by the new U.S. Administration and the tense geopolitical climate elsewhere could temper global crude oil demand. OPEC and its allies have already announced that production restrictions will continue until at least spring 2025. Oil benchmarks are trending downwards for next year, with Brent expected to trade in the US$70-80 range and WTI at US$60-70.
Prices are already low. If the economic situation turns out to be weaker than currently anticipated (particularly in China), and non-OPEC producers continue their production momentum, prices could fall even further.
The impact on your business
- Fluctuating oil prices can have a direct impact on the cost of transportation and logistics. Lower oil prices can reduce fuel costs, which in turn can lower the cost of producing goods and services.
- SMEs in energy-intensive sectors such as manufacturing and agriculture are more sensitive to movements in the oil market. If you operate in, or deal heavily with, these sectors, you may feel the impact of changes more quickly.
- High oil prices can reduce consumers' disposable income, leading to lower spending on non-essential goods and services. Lower prices at the pump can have a positive impact on SMEs in consumer discretionary sectors.
Proven strategies
- The price of energy products can be a determining factor in your cost structure. They also impact on consumers' budgets in general. A good cost management and pricing strategy can set you apart from your competitors.
Exchange rates
Updated December 10, 2024
The loonie flies low
The Canadian dollar continues to lose altitude as the year comes to a close. At the end of September, the loonie was trading at US74 cents, but has since depreciated rapidly towards 70 cents. The weakness of the dollar has accelerated since the election of Donald Trump whose threats of tariffs could hurt the Canadian economy. The spread between U.S. Federal Reserve and Bank of Canada interest rates could also widen more than expected, which also lowers the loonie's value against the greenback. The Canadian dollar should remain between US$0.70 and US$0.73 in 2025.
The impact on your business
- In general, the Canadian dollar's impact on SMEs will depend on the nature of your business and its dependence on imports versus exports.
- A weak Canadian dollar supports exports. If, on the other hand, you are importing inputs or machinery, your operating costs could rise in the coming months.
Proven strategies
- It's important for SMEs to manage currency risks and consider strategies to mitigate potential negative effects. Find out how to manage foreign exchange risk when selling abroad.
Interest rates
Updated December 10, 2024
Further cuts to end the year
The Bank of Canada cut interest rates by another 50 basis points to close 2024. In its December 11 announcement, the bank's Board of Governors opted to keep up the fast pace of rate cut similar to October’s annoucement. The December announcement reflects a degree of worriness in the resilience of the Canadian economy on the part of the Bank of Canada. Inflation remains subdued, which should prompt the bank to continue easing credit conditions in the country.
The key rate will start 2025 at 3.25% after 175 basis points of cuts in the second half of 2024. Effective rates for households have fallen by 63 basis points since June, and those for businesses by 106 points.
The impact on your business
- Interest rate cuts have improved household and business confidence, which bodes well for the economy as a whole.
- However, businesses need to remain patient because the economic recovery will be gradual as the soft landing continues. Full economic recovery will take a few more months and persistent sectoral challenges remain.
Proven strategies
- Keep a close eye on interest rates to optimize your company's financial situation. The commercial loan calculator will help you determine the interest associated with your loan.
- With rates still trending downwards, it's a good time to plan your future investment projects. Use our financial tools to calculate your company's debt-to-equity ratio, as well as other important ratios that banks take into account when evaluating loan applications.
Residential market
Updated December 10, 2024
Already noticeable improvements nationwide
Activity is picking up in the residential resale market, with the number of transactions recorded in October reaching its highest level since April 2022. Rate cuts having an impact on the market, with home sales jumping 7.7% between September and October alone. Average home prices have also risen, albeit modestly for the time being, while the MLS Home Price Index continues to decline.
The impact on your business
- Companies operating in the residential, construction and furniture sectors will be among the first to feel stronger demand caused by lower interest rates.
- Even if your company is not directly dependent on the residential sector, trends in this market have consequences for all businesses. For one thing, housing is consumers' biggest budget item. What's more, according to a new survey by KPMG Canada, business leaders see housing affordability as the greatest risk to the economy. The affordability issue weighs heavily on executives as they strive to attract and retain the staff they need for their operations.
Proven strategies
SME confidence
Updated December 10, 2024
Business confidence returns at year-end
Optimism among Canadian businesses improved significantly in November. The CFIB business confidence index for the year ahead, which had been stagnant since May 2024, rose by almost four points. This took it to 59.7, the highest level since June 2022. An indicator of 50 means that as many business leaders expect the business environment to deteriorate as to improve over the period covered (12 or three months).
The index therefore indicates that optimism rose in November, probably partly in response to the interest rate cuts. It remains to be seen whether this trend will continue in the months ahead, given the high level of uncertainty hanging over Canadian companies.
The impact on your business
- Business confidence plays a crucial role in shaping the strategic decisions and growth potential of SMEs. When business confidence is high, SMEs are more likely to invest in new projects, technology and hiring.
- It is important for SMEs to monitor economic indicators in order to make informed decisions.
Proven strategies
- Knowing that optimism seems to be returning to Canadian companies, make sure you too have a vision aligned with the external environment, so you don't find yourself at the back of the pack. Plan your strategy accordingly.