Canadian Outlook Economic Forecast: Spring 2005

This quarterly executive summary provides highlights of the Canadian Outlook that presents the short-term national outlook.

Document Highlights

• The real trade balance fell sharply over the second half of 2004 and will limit economic growth to 2.3 per cent in 2005.
• The Bank of Canada has taken a “wait-and-see” approach and is unlikely to lift interest rates until late in 2005.
• U.S. real GDP growth will ease to 3.2 per cent in 2005 as climbing interest rates take the steam out of consumer spending and new home construction.
• A growing interest rate spread with the United States will favour the greenback and take some pressure off of the Canadian dollar, which is expected to average US$0.80 in 2005.
• The latest federal budget provides little economic stimulus in 2005 and 2006, as most new measures are back-end loaded.
• Another massive build in business inventories was registered in 4Q 2004, with wholesalers and manufacturers responsible for most of the gain.