Canada's Economy at Risk as Rail Stoppage Threatens Billions in Losses
By Promit Mukherjee
OTTAWA - Canada's economy faces potential losses of billions of dollars if the rail stoppage that began on Thursday persists, leading to job losses and increased consumer prices, experts caution. However, the impact could be minimized if the stoppage is resolved quickly.
The halt in operations by Canada's two major freight rail operators, Canadian National Railway and Canadian Pacific Kansas City, following a labor dispute with the Teamsters union, has raised concerns among economists. Pedro Antunes, chief economist at the Conference Board of Canada, warns that an extended stoppage could have devastating effects on the economy.
A prolonged two-week rail strike could result in a $3 billion loss in nominal GDP this year, with a four-week strike potentially lowering GDP by nearly $10 billion in 2024 and leading to 49,000 job losses. Robert Kavcic, senior economist at BMO Capital Markets, describes the simultaneous stoppage of rail freight as "growth-negative and inflation-positive," with an estimated weekly impact of over $2 billion in GDP terms.
With Canada's economic growth already struggling this year due to high interest rates and reduced growth forecasts, a protracted rail stoppage could further hinder recovery efforts. Derek Holt, head of capital markets economics at Scotiabank, warns that even a short one to three-week strike could have a monthly drag on GDP, escalating significantly beyond three weeks.
As Canada heavily relies on CN and CPKC for transporting goods, any disruption in rail services could have far-reaching consequences. Past rail stoppages have typically been short-lived, but experts emphasize that a prolonged strike could inflict significant economic damage.
In conclusion, a prolonged rail stoppage in Canada could lead to substantial economic losses, job cuts, and inflationary pressures, affecting not only businesses but also consumers. It is essential for policymakers and industry stakeholders to address the labor dispute swiftly to mitigate the potential negative impact on the economy.