No. 1 Canada economy forecaster expects a U.S.-led recovery: Reuters poll

Fri Feb 5, 2016 8:59am EST
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(Reuters) - Canada's economy will sputter until at least mid-year on cheap oil and stretched urban real estate markets but should pick up later in the year provided the United States does, according to the most accurate forecaster on the economy in Reuters polls in 2015.

The U.S. economy will strengthen and boost demand for Canadian exports, spurred on by a weaker currency, said James Blumenthal, chief Canada market analyst at Informa Global Markets, who topped the Reuters economic accuracy league for 2015, compiled by StarMine.

"A strengthening U.S. economy is the key to Canadian growth," he said. "(It) would be a positive for Canadian exports as it would mean increased demand."

That is also something on which Bank of Canada Governor Stephen Poloz has long pinned his hopes for an economic turnaround.

However, in the near-term, a small risk of another recession can not be ruled out, Blumenthal said.

The price of oil, a major Canadian export, has fallen more than 70 percent since mid-2014 due to a rundown of inventory and weak global demand, and likely brought the economy to a halt in the fourth quarter.

This, along with the first policy tightening in the U.S. in nearly a decade, sent the Canadian dollar on its longest downward spiral on record last month to a 13-year low.

That was one of the reasons why Canada's central bank left its benchmark interest rate on hold at 0.50 percent on Jan. 20, despite the economic slowdown.

The Bank of Canada's Poloz downgraded his growth forecast for 2016 to 1.4 percent from 2.0 percent in October. Blumenthal says those forecasts are slightly optimistic.   Continued...