Welcome to the GrantMatch Prospector, a quarterly publication where we review recent economic trends and their effects on the grants and incentives sector.
We’re happy to report, that after a long slumber, it appears that the economy is finally starting to show significant signs of life. The combination of successful vaccination efforts, the emergence from covid restrictions, along with government stimulus efforts in Canada and the United States, is leading to solid growth and a strong economic outlook.
Gross Domestic Product (GDP) Canada is projected to grow by 5.1 percent in 2021, while in the United States it is expected to grow by 5.8 percent according to the Royal Bank of Canada. In 2022, GDP is expected to increase by 4.3 percent in Canada and 3.8 percent in the United States.
The wild card for any of these projections continues to be covid. The delta variant has continued to impact economic activity in North America and other parts of the world, leading to a dampening in economic forecasts from earlier projections.
Although demand is increasing, supply in many parts of the economy has not caught up, contributing to higher levels of inflation. These supply chain interruptions along with pent-up demand, government stimulus spending, and labour shortages have led to an increase in inflation which has not been seen in several decades. The Consumer Price Index (CPI) is projected to increase by 3.2 percent in Canada and by 4 percent in the United States for 2021. Many economists project these rates to be transitional as the economy emerges out of the covid shutdown with a return to a more normal level over the next year. There are some concerns that these increases may become more embedded in the economy and lead to higher inflation rates going forward.
What does this all mean for incentives? With both Canada and U.S. advancing with stimulus efforts, along with other initiatives aimed at decreasing greenhouse gas emissions, the incentives perspective going forward is strong. The recent election has resulted in no change with a Liberal minority government. This outcome will provide continuity for the grant programs announced over the last year and this spring’s Federal Budget.
Sources: RBC Economics, U.S. Federal Reserve.