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The Organisation for Economic Co-operation & Development Thursday also trimmed its forecast for Canada’s economic growth next year.

The OECD now sees Canada’s economy expanding 2 per cent in 2019, rather than the 2.2 per cent it forecast earlier.

The lack of clarity on the future of the trade agreement is creating an “uncertain operating environment,” and only 34 per cent of business leaders believe now is a good time to invest, the lowest level since 2008, Matthew Stewart, the conference board’s national forecast director, said in the report. Carbon taxes and a concern over the country’s tax competitiveness are also weighing on business confidence, he said.

Longer Damage

The base case is for Canadian GDP growth to slow to 1.8 per cent in each of 2019 and 2020, after reaching a 2 per cent pace this year, principal economist Alicia Macdonald said in a phone interview. The auto trade war would trigger a bigger drop in Canada’s dollar, which would “buffer some of the other sectors” at first, while the economy suffers longer-lasting damage to business investment, she said.

The Conference Board’s forecast shows the nation’s housing market cooling through 2018, interest rates rising and employment growth moderating, all of which will “take a bite out of demand,” the board’s report said.

“With little growth in new manufacturing capacity, exports of non-energy goods will remain weak,” Stewart wrote, adding the potential for a growth pickup led by trade “seems increasingly improbable as the NAFTA trade negotiations drag on.”

Bloomberg.com