April 13 (UPI) -- Uncertainty on U.S. trade policy and a mixed record for labor means Canada's economy is still under pressure despite higher oil prices, the central bank said.
The Canadian economy, Alberta's in particular, was under considerable pressure last year because of the slump in crude oil prices. The situation was compounded in early 2016 when regional wildfires sidelined about 1 million barrels of oil production per day.
Stephen Poliz, the governor of the Central Bank of Canada, told lawmakers in Ottawa that, with oil prices improving, economic expansion over the last six months was better than expected. The economy for the next six months should expand at around 2.5 percent, up from the 2 percent growth forecast from January.
"What we are seeing now is that energy-related activity has stopped declining and is transitioning to a new level that is commensurate with the current level of oil prices," he said in his opening remarks before the House of Commons.
Outside of the energy sector, the strains on the Canadian economy persist. By the bank's estimates, the labor market is uneven, with wages increasing slowly and capacity unfilled, compared with a U.S. economy that's close to full employment.
Corporate spending, meanwhile, is modest at best, Poliz said. Most companies said they're targeting sustainability, rather than expansion, which he said shows the overall economy is not yet moving toward full-fledged growth.
U.S. President Donald Trump on taking the oath of office in January pledged to dismantle or reconfigure central parts of the North American Free Trade Agreement, rattling Canada's nerves as the United States is a key trading partner. Almost all of Canada's oil exports target the U.S. market
Poliz said that uncertainty is leaving many economists and corporations guessing.
"With all of this uncertainty, we cannot reliably model the impact of changes to U.S. trade policy," he said. "Instead, we have built in an extra degree of caution in our forecast for exports and investment relative to our January projection."