This quarterly economic forecast examines the short-term economic outlook for Canada – all major components including consumer expenditures, housing, government, non-energy business investment, and trade. The outlook for the financial, labour, and energy markets is also given along with costs and prices. The U.S. economic outlook is presented in a separate section.
Canadian Outlook Economic Forecast: Winter 2007
Canadian Outlook Economic Forecast: Winter 2007
Canadian Economic Analysis
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- U.S. consumer spending is hanging on despite slumping new home construction. The U.S. economy is forecast to post growth of only 2.2 per cent in 2007.
- Canada’s domestic economy has enough momentum that it should perform well despite the hiccup in U.S. growth. Real GDP in Canada is expected to post growth of 2.7 per cent in 2007 but then to rebound with growth of 3.3 per cent in 2008.
- Softer U.S. growth should lead to lower interest rates in the United States, but the Bank of Canada is expected to stick to its guns and hold rates flat.
- The Canadian dollar will continue to lose steam through the first half of 2007. While near-term interest rate changes may favour the loonie, sliding commodity prices will have a bigger negative impact.
- Real merchandise exports rebounded in 2006Q3, posting annualized growth of 5 per cent. A softer loonie should allow for modest but positive growth in exports in 2007 despite a lethargic U.S. economy.
- Core inflation has recently been boosted by Alberta’s swelling housing costs, but the all-items Consumer Price Index, softened by sales tax cuts and lower energy prices, is forecast to post growth of only 1.2 per cent in 2007.
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