Canada emerging from recession with modest growth projected
in 2010: RBC Economics
Canadian economy remains on course for positive growth by
the third quarter of this year
TORONTO, September 16, 2009 — The tide is turning
for the Canadian economy, with growing signs that aggressive
policy actions are taking effect, according to a new report
by RBC Economics. The report indicated that although the Canadian
economy contracted at an average of 3.4 per cent in the second
quarter, the stage is set for a return to positive growth
by the third quarter of this year.
"Improved financial markets, low borrowing rates and
fiscal stimulus have moved Canada's economy forward,"
said Craig Wright, senior vice-president and chief economist,
RBC. "We expect that Canada's recession will turn out
to be the least severe of the past three, even after the consecutive
hefty drops in GDP output from late 2008 and early 2009."
The Canadian economy is set to grow in the second half of
this year with a sharp rebound in auto production in the third
quarter and a recovery in the housing market leading the charge.
The report projects that the Canadian economy will grow by
2.0 and 2.4 per cent in the third and fourth quarters of 2009,
respectively, and 2.6 per cent in 2010.
"While the staying power of the recovery at home and
abroad is still at risk, we believe the momentum is likely
to build as financial markets continue to recover and stimulus
spending continues to have a positive impact," added
Wright.
Consumer spending, however, is still being weighed down by
the 8.7 per cent unemployment rate, which the report anticipates
is likely to edge higher by year's end. Improvement is on
the horizon in early 2010, when RBC forecasts the stage will
be set for the labour market to stabilize, the unemployment
rate to begin falling and the hiatus in consumer spending
to end. However, with the unemployment rate set to remain
historically high, inflation is expected to remain below the
Bank of Canada's mid-point target of 2 per cent.
With positive signs emerging in the U.S. economy, RBC has
boosted its U.S. forecast for growth over the second half
of this year to 1.9 per cent and is anticipating the U.S.
real GDP will expand by an average of 2.2 per cent in 2010.
The report notes that expected Q3 growth of 2.0 per cent will
be the first quarter in the past five to show a positive gain.
Though the return to positive growth in the U.S. is encouraging,
the rate of increase in 2010 will only result in modest downward
pressure on the unemployment rate. RBC Economics expects this
rate to peak at 10.0 per cent late this year and only drop
to 9.7 per cent by the end of 2010. A slow labour market is
expected to keep inflation very low through the forecast.
A complete copy of the forecast is available as of 8 a.m.
EDT, at
www.rbc.com/economics/market/pdf/fcst.pdf.
The RBC Economics Provincial Outlook assesses the provinces
according to economic growth, employment growth, unemployment
rates, retail sales and housing starts.
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For more information, please contact:
Craig Wright, RBC Economics, (416) 974-7457
Paul Ferley, RBC Economics, (416) 974-7231
Matt Gierasimczuk, RBC Media Relations, (416) 974-2124
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