Canada’s economy is facing a potential crisis due to the rail stoppage that began on Thursday, which could result in significant economic losses if it continues for an extended period of time. Economists and analysts have raised concerns about the negative impact that a prolonged rail strike could have on Canada’s GDP, job market, and consumer prices.
According to experts, if the rail stoppage lasts for more than a week, the economic consequences could be severe. Pedro Antunes, chief economist at the Conference Board of Canada, warned that a two-week rail strike could lead to a $3 billion loss in nominal GDP this year. Furthermore, a four-week strike could lower GDP by nearly $10 billion in 2024 and result in 49,000 job losses. The simultaneous stoppage of Canada’s rail freight by Canadian National Railway and Canadian Pacific is expected to have a growth-negative and inflation-positive effect on the economy.
Senior economist Robert Kavcic from BMO Capital Markets predicts that the rail stoppage could lower economic growth by approximately 0.1 percentage points each week. This would translate into a weekly impact of over $2 billion in nominal GDP terms. The economic growth in Canada has already been lackluster this year, and a prolonged rail strike could further dampen growth prospects.
The rise of unemployment to a 30-month high and upcoming mortgage renewals worth around C$300 billion next year have already strained economic conditions in Canada. Analysts are worried that a protracted rail stoppage could exacerbate economic challenges and lead to economic inertia. Derek Holt, head of capital markets economics at Scotiabank, emphasized that a one- to three-week strike could have a monthly drag of 0.1%-0.2% on GDP, with the impact heightening significantly beyond three weeks.
Canada heavily relies on CN and CPKC to transport a wide range of essential commodities, including grain, fertilizers, chemicals, and automobiles. The annual rail freight cargo in Canada exceeds C$380 billion, with the majority of goods being transported on CN and CPKC’s tracks. Randall Bartlett, senior director of Canadian economics at Desjardins, noted that past rail stoppages have typically been short-lived and have not extended beyond a week or 10 days.
The ongoing rail stoppage poses a significant threat to Canada’s economy, with the potential to cause billions of dollars in economic losses and job cuts. While a short-lived stoppage may have a minimal impact, an extended strike could lead to severe economic consequences. It is essential for all stakeholders involved to work towards a swift resolution to prevent further damage to the Canadian economy.