UPDATE 2-U.S. 'fiscal cliff' may help explain weak exports -Bank of Canada

Thu Mar 6, 2014 2:48pm EST
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* Domestic challenges not unique -Bank of Canada's Murray

* Global experience helps explain inflation, exports

* Sees inflation rate dipping again in February

* Australia is evidence soft landing possible for housing

By Jennifer Kwan

VICTORIA, British Columbia, March 6 (Reuters) - Canadian exports were unexpectedly weak over the past two years, partly due to U.S. budget cuts and the expiration of tax breaks known as the "fiscal cliff," that took effect early last year, a senior Bank of Canada official said.

Deputy Governor John Murray said in a speech on Thursday that lackluster Canadian economic growth and three puzzling trends - weak inflation, investment and exports - could be partly explained by international factors.

He also pointed to Australia as evidence supporting the central bank's forecast for a soft landing for the Canadian housing market.

With respect to exports, there has been an apparent disconnect between foreign demand, particularly in the United States, and the performance of Canadian non-commodity exports.   Continued...