Is the current growth streak too good to last?

OTTAWA The economies of Canada and the United States have been on a mega-charged growth spurt over the past year. Enjoy it while it lasts.

It’s true that neither NAFTA uncertainties nor Trump ambiguities — among other possible obstacles — have held back investors for very long, if at all.

Canada has now recovered from the global oil-price shock, lifting the loonie in the process. The country has turned in its best string of quarterly GDP growth figures in a half dozen years, helping to add tens of thousands of jobs to the labour force.

But like many economic successes, there comes a time for inevitable paybacks. One of them — and it’s a big one — is the return of higher interest rates, leading to costlier consumer items, especially in the housing market. The Bank of Canada has already raised its trendsetting lending level by a quarter point in July and again in September, lifting the benchmark to an even one per cent.

“From a GDP point of view, we’ve had booming economic growth. From a job-creation point of view, we’ve had a boom. Over the last 12 months, we’ve created 374,000 jobs ... and the unemployment rate in Canada (now at 6.2 per cent for August) has moved markedly lower,” said Craig Alexander, senior vice-president and chief economist at the Conference Board of Canada. “So, it’s been good — it’s been too good. It’s not sustainable. It has to moderate.” He estimates Canada’s GDP next year “will drop down toward two per cent or slightly lower, which is returning to something healthy (and) in line with its long-term sustainable pace.”

Those recent estimates closely track the Bank of Canada’s outlook and that of many private-sector economists. The U.S. Federal Reserve is also at an economic turning point.

The pace of U.S. rate increases has slowed but will eventually resume as its central bank next month begins its long-anticipated unwinding of the quantitative easing program that for nearly a decade flooded trillions of dollars into the financial system through purchases of bonds and other financial instruments to boost consumption and growth.

That October unwinding process comes after the U.S. economy picked up by 2.6 per cent in the second quarter of 2017, following a growth rate of 1.4 per cent in the previous three-month period and a pace of 2.1 per cent in the final quarter of 2016.

The Fed “is hoping that this program runs quietly in the background, causing little in the way of market dislocation and angst, but accepting that it should steer bond yields higher over time,” said Michael Gregory, deputy chief economist at BMO Capital Markets. “And, in order to minimize the risk of unintended negative market consequences, particularly at the start of balance sheet normalization, as expected, the (Fed) didn’t change policy rates ... after moving in the past three consecutive quarters.”

The bank expects the Fed to raise rates in December and as much as three times in 2018.

But U.S. growth prospects could be dampened by prolonged negotiations to revamp the North American Free Trade Agreement.

In Canada, meanwhile, lowfor-longer borrowing costs have kept home prices fired up since the 2008-09 recession and led to fears of a housing bubble-andburst scenario should too many consumers get caught with too much debt as mortgage rates edge up. Oct. 25 could see another rate increase when the central bank, led by governor Stephen Poloz, releases its quarterly Monetary Policy Report and holds a news conference in Ottawa.

In the meantime, the public and the media will have a chance to question the BoC governor directly after a speech to the Board of Trade in St. John’s, N.L., on Wednesday.

Two days later, on Friday, Statistics Canada will release GDP data for July — the first month of the third quarter of 2017.