issue: January 2005 APPLIANCE Magazine 53rd Annual Appliance Industry Forecasts North America - Canada's Strong Outlook	Share  Printable format  Email this Article  Search
by Jill Russell, Associate Editor The Canadian economy is also anticipating a strong 2005.

Compared to recent years, when the Canadian economy grew at the same pace and surpassed the U.S. economy, 2004 was a moderate growth period for the country.

According to the Bank of Montreal (BMO) Financial Group’s Outlook 2005 report, with an unexpected rise in exports and after a consequently higher-than-expected GDP of 4.3 percent in the second quarter, fourth-quarter exports are expected to decrease, reducing the overall GPD to 3.4 percent. With hopes that the upturn of the U.S economy will help spur growth in Canada, the country’s GDP growth for 2005 is speculated to grow to 3.5 percent, almost matching that of the U.S., as indicated by the Organization for Economic Co-Operation and Development (OECD).

Due to the recent strength in Canada’s monetary value, investments in both plant facilities and equipment are expected to be a leading expenditure in 2005 and 2006. The OECD speculates industry will focus on increasing its labor productivity rather than simply adding numbers to overall workforce to help curb costs, and because of this, BMO forecasts Canada will match the productivity performance of the U.S. in 2005.

In line with the increased growth, analysts anticipate the Bank of Canada will gradually raise interest rates until a “neutral” rate of 4.5 percent is reached by the middle of 2006. With the historically low rate, household spending is forecast to continue at a healthy level, helping to increase overall business investment. Additionally, the increase in interest rates is expected to increase moving rates, which in turn, will help to increase sales of durable goods. Consumer spending, a major indicator of economic well being, is also expected to expand to 3 percent in 2005. However, this is down from the 2004 forecast rate of 3.7 percent.

As reported by the Canadian Appliance Manufacturers Association (CAMA) in April 2004, the country’s core product appliance segment, which includes refrigerators, ranges, washers, dryers, and dishwashers, is set to experience a 2.6-percent increase in 2004. The association says it expects core products to grow just under 1 percent each year in 2005 and 2006.

The BMO says that although the electrical appliance segment has experienced strong growth in recent years, the market has been challenged with the sharp rise in the Canadian dollar and rising imports from Asia. Strong growth is still forecast for the segment throughout 2004; however, as CAMA estimates, BMO says growth is expected to slow down slightly beginning in 2005 and on into 2006.