Canadian economic growth to stay subdued; inflation near target: Reuters poll

Thu Jul 17, 2014 10:47am EDT
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By Deepti Govind

BANGALORE (Reuters) - Canada's economy will grow a bit more slowly than previously thought over the next two years, a Reuters poll found, but economists expect inflation to stay near the central bank's 2 percent target.

The poll of 34 economists taken in the past week pegged economic growth this year at 2.2 percent, down a notch from 2.3 percent in an April poll. High household debt and low wage increases are expected to restrict consumer spending, a key to growth.

The poll showed expectations of growth picking up only slightly to 2.5 percent in 2015, compared with the Bank of Canada's latest forecast of 2.4 percent, and to 2.6 percent in 2016, versus the central bank's outlook of 2.3 percent.

The April poll showed economists were expecting growth of 2.6 percent in 2015 and 2.7 percent in 2016.

Should the Reuters medians prove right, Canada will outperform the United States this year but lose its lead in 2015 as growth in the world's largest economy accelerates to 3.0 percent.

Canada's economy faces considerable challenges, said David Tulk, chief Canada macro strategist at TD Securities.

"This just means the path or the road to healing is just that much longer," Tulk said. "As the labor market generally cools, we are getting quite subdued wage growth, and that contributes to a slower pace of consumer spending."

With unemployment likely to stay close to 7 percent this year and next, a lot rides on exports and businesses' taking over the baton from consumer spending and the housing market, something that has yet to happen.   Continued...

The closing down Sears store is shown in downtown Vancouver, British Columbia September 13, 2012.    REUTERS/Andy Clark