According to a report by Desjardins, Canada’s population boom is hiding the true extent of the country’s economic problems. The report argues that while headline economic numbers may seem positive, when assessed in light of population growth, a bleaker picture emerges. On a per capita basis, real gross domestic product (GDP) has fallen in each of the past four quarters, and domestic demand has fared even worse. This is due to declines in interest-rate-sensitive sectors like housing, as well as consumption of non-durable goods and investment in machinery and equipment. The report also highlights the lack of business investment in Canada, with many companies relying on temporary foreign workers to address labor shortages instead of investing in productivity-enhancing technology. As a result, labor productivity is falling in Canada, while it is rising in the United States. Other factors contributing to Canada’s economic lag include high household debt, reduced government subsidies and tax incentives, and a weakening job market. Despite the economic slowdown, the report suggests that the Bank of Canada is unlikely to change its policy rate until late next spring.
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