TORONTO (Reuters) - The Canadian economy will avoid slipping into a recession as domestic demand helps to offset the negative impact of falling commodity prices, the Conference Board of Canada said on Wednesday.
In its autumn outlook, the Conference Board said the economic turmoil plaguing the United States will limit Canadian economic growth to 0.8 percent this year, down from the 1.7 percent the board forecast in its summer outlook.
“Living beside a troubled neighbor is taking its toll,” Glen Hodgson, chief economist at the Conference Board, said in a statement. “Massive declines in the trade sector have shredded Canada’s economic growth, and raw material prices have fallen off their peak levels.”
A recession is defined as at least two consecutive quarters of contraction in a country’s gross domestic product, and the Canadian economy narrowly avoided a recession earlier in 2008.
The Conference Board’s forecast for growth in gross domestic product in 2009 is 2.2 percent, which is down from the 2.7 percent it forecast in its previous report.
The autumn report said a slowdown in economic growth in industrial and developing economies is weighing on prices for oil and other key Canadian exports. which will weaken the real income gains that have sustained the domestic economy.
The Conference Board said it expects real net exports to fall by C$34 billion ($29 billion) in 2008, equivalent to 2.5 percent of real gross domestic product.
It said Canadian auto exports are forecast to fall by 19 percent this year because of a steep drop-off in U.S. vehicle sales. It said Ontario will bear the brunt of the losses.
“Signs of malaise are creeping into the outlook,” the report said. “While the manufacturing sector continues to bleed jobs steadily, other sectors have also seen an erosion in the growth of jobs in recent months.”
Reporting by Frank Pingue; Editing by Peter Galloway