Today is referred to as “Blue Monday” mostly because it’s a time when people are starting to get their credit card bills in to see the holiday spending, and getting sick of the cold weather wanting to travel somewhere warm. In the world of finance, reports on consumer spending and earnings for the last part of the previous year start being released. Today saw a report from MNP citing that survey results show 1 in 3 Canadians have difficulty paying their monthly bills due to the debt load they’re carrying.
Consumer spending and debt, NAFTA, Interest rates, and strain on small business from new tax changes and minimum wage increase are all going to be on the radar for this year.
This is what Canada can look forward to in 2018. With a 3% growth in 2017, the nation can expect less. Analysts predict a 2.1% growth in 2018, with less jobs being created than were in 2017.
A lot of uncertainty is to come with NAFTA negotiations continuing in 2018. President Trump has threatened to tear up the agreement entirely, and have no trade agreement with Canada or Mexico. I don’t think anyone would be surprised if he did that, but what does that mean for Canada?
As one of our biggest trade exporters, Canadian businesses and commodities rely on the relationship with our neighbour to the south. What would happen if the free trade agreement were to be gone? There would be export costs equal to that directed by the World Trade Organization. However, reports seem to show that it wouldn’t make a significant financial impact on the transactions. The only fear would be trade loyalty discontinuing because the free trade benefit for importers is gone.
Luckily, Canada entered into the Trans-Pacific Partnership, a trade agreement between 11 countries including Canada and Mexico (not the USA). This allows for favourable trading with the Pacific-coast nations, which would allow our resources and products to be exported beyond the USA.
It seems to always be a game of sorts – predicting whether the Bank of Canada is going to be increasing interest rates, and how much. Analysts have plenty of indicators to predict, so I’ll just relay the information they publish. In the next 18 months, predictions currently are that there will be 2 further interest rate increases, bringing the Bank of Canada overnight lending rate to 1.5%. If the US Federal Reserve increases their interest rates more than Canada’s, this will bring our currency down making it favourable for US importers and Canadian tourism industries.
What will the interest rate increase mean for you? If you’ve got a variable rate mortgage or other lending, you’ll be paying more by the end of the year. New debt will be issued at a higher rate, so if you’re looking at any consolidation of debt now is the time to examine that.
Small Business Changes
Many small businesses in retail or service industries have been preparing for the minimum wage increase for months. Where will we as consumers see this? On our bill. These businesses have no other option than to increase their pricing in order to keep a healthy bottom line. Some restaurants have already notified patrons that there will be a newly priced menu for 2018. So for those employers with above-minimum wage employees, a plan to incrementally increase those wages as the cost of living will be increasing should be calculated and implemented.
On top of the minimum wage increase in effect, the Government of Canada also proposed tax reform geared at “closing the loopholes” for many small business owners. For more details on tax changes in effect 2018, the Ministry of Finance has compiled a summary.
With the legalization and retail distribution coming in this summer, we’ll be sure to see more changes to the markets. We can only wait and see where this new industry will go, and the changes to the economy we’ll see as a result – either with new business being created to cater to the recreational enjoyment of cannabis, or a decline in other legal products like alcohol. Either way, I’m sure we’ll see an increase in Dorito sales (haha!). To learn more, I devoted a blog post to the craze of cannabis.
Worried about your debt load or financial future? February will see a variety of opportunity for you to take a closer look at your personal finances, and I’ll be providing Q&A periods, tools, and in-person events to help you get on track to being the best financial version of yourself!