The Canadian economy is gaining momentum despite looming concerns over US-imposed tariffs, according to the RBC Economic Outlook quarterly report. While not nearing the 3.0% growth pace of 2017, real GDP is expected to grow by 2.0% in 2018 before slowing slightly to 1.8% in 2019.

Recent US tariffs have had relatively small impact on Canada as steel and aluminum production account for just 0.5% of Canadian GDP and jobs. And an increase in consumer spending, wage growth and business investment have all contributed to positive signs for Canada, according to the report.

Fears over trade and the slow pace of NAFTA negotiations have also not dissuaded Canada’s companies from using their capital this year, according to the report RBC expects business spending to rise by 6.3% in 2018, while the outlook in 2019 is for a slower 2.1% lift. This assumes there is no further ramping up of tariffs or the end of NAFTA.

“Our baseline view is that Canada’s economy will grow at a mildly faster clip in the remaining quarters of 2018,” said Craig Wright, senior VP and chief Economist at RBC. “Financial conditions remain solid and the labor market is healthy. Wage growth continues to accelerate and it will blunt the impact that rising interest rates will have on household debt service costs.”

All 10 provinces will likely see the pace of economic growth slow compared with last year. Canada’s western provinces are forecasted to lead in economic growth throughout 2018. British Columbia, Alberta and Saskatchewan are each expected to rise 2.4% in 2018 — well ahead of the national average. BC and Alberta have both been boosted by strong job growth numbers. Prospects in Saskatchewan also remain above average, buoyed by positive returns in potash production and agriculture.   

Ontario’s economic outlook should remain close to the national average of 2.0%, according to the report. With the job market on solid ground, firms are using capital investment to boost output. “However, Ontario’s symbiotic trading relationship with the US means that uncertainty around NAFTA could throw a wrench in future investment plans,” the report stated. The economy in Quebec is expected to slow to 2.1% in 2018 following an “impressive” 2017, and RBC expects that the Quebec labor force will remain fully employed throughout 2018.

Separately, the Canadian Employment Law Today reported today that amendments to Ontario’s Workplace Safety Act moved one step closer to making client companies responsible for insurance premiums and accident costs for injuries to temporary agency workers.