Canada’s growth hit by cau­tious busi­ness spend­ing

The Pak Banker - - 6BUSINESS -

Cau­tious busi­ness spend­ing and in­creased U.S. fis­cal re­straint will weigh on Cana­dian growth, ac­cord­ing to the lat­est Eco­nomic and Fi­nan­cial Mar­ket Out­look is­sued to­day by RBC Eco­nom­ics. RBC trimmed its real GDP growth forecast to 1.8 per cent through 2013, fol­low­ing softer-than-ex­pected growth in 2012.

Af­ter boast­ing a rel­a­tively strong eco­nomic per­for­mance over the past sev­eral years, Canada’s econ­omy hit a speed bump in late 2012, said Craig Wright, se­nior vice-pres­i­dent and chief econ­o­mist, RBC. RBC notes that strong com­pany bal­ance sheets will help to abet busi­ness spend­ing go­ing for­ward. At the same time, high lev­els of house­hold debt will limit spend­ing on hous­ing as well as goods and ser­vices, although mod­er­ate gains in in­come and em­ploy­ment will par­tially off­set this, RBC says.

Look­ing at the Bank of Canada’s pol­icy rate, RBC ex­pects it to re­main at the cur­rent level for longer than pre­vi­ously thought. The main driver of this ad­just­ment is weaker than ex­pected growth in Canada over the sec­ond half of 2012, which re­sulted in a wi­den­ing out­put gap – the dif­fer­ence be­tween ac­tual and po­ten­tial out­put – and lower in­fla­tion.

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