Canada’s economy will avoid slipping back into recession, but growth will remain modest in 2011 and 2012, according to the Conference Board of Canada’s Canadian Outlook—Autumn 2011.
“The ongoing volatility in equity and commodity markets is a reminder of how fragile the state of the U.S. and global economy remains,” said Pedro Antunes, the Conference Board’s director, national and provincial forecast. “While the turmoil is not expected to derail the global outlook altogether, growth has slowed markedly over the last few quarters.
“Canada’s domestic economy is on stronger footing than many other developed economies. Employment has recovered from recession levels, housing markets are balanced and business investment has surged at a surprising pace over the past year and a half. However, a sluggish outlook for the United States is not good news for Canada, and the economic situation in Europe is even more uncertain and fragile than in the U.S.”
The current outlook assumes that the U.S. and European governments will implement the policies necessary to stave off another serious downturn. But there remains an exceptional degree of risk to the outlook.
The Conference Board’s U.S. forecast for 2011 has been downgraded to less than 2% growth. But it is still expected that the U.S. economy will avoid recession. Businesses are flush with cash, bank commercial lending activity has finally begun to grow again, and industrial and export activity have been rising. All of this is expected to help the private sector bolster employment over the coming months, which would go a long way to reviving consumer and investor confidence in the U.S.
Canadian real gross domestic product (GDP) is expected to register only modest growth of 2.1% in 2011. Real GDP growth is expected to edge up to 2.4% in 2012, as still-strong commodity prices drive business investment and production in the resource sector. Household spending will be bolstered by record-low financing rates and steady employment gains. But for the first time since 1997, overall government spending will be a drag on the economy in 2012, due to a sharp decline in infrastructure investment and restraint on other government services.