In a role reversal, economists predict U. S. growth will buoy Canada in 2013
TORONTO — Economists expect the United States to lead economic growth in the developed world in 2013, and predict Canada will get a boost riding on its coattails.
That was the consensus at the Economic Club of Canada’s 2013 outlook forum, held in Toronto on Friday.
“The real strongest area of advanced economic growth this year will likely be in North America,” said Craig Alexander, senior vice- president and chief economist of TD Bank. “People could be underestimating the growth we could see in the U. S.”
The six economists that took part of the forum all agreed U. S. economic growth would likely amount to around two per cent this year. In general, they forecast that economic growth in the advanced world will be tepid in the first half of the year before gaining steam in the latter half of 2013.
And while Canada has tended to outperform the United States on the economic front in the past few years, the economists sounded much more bullish on the U. S. this year.
“We’ve begun to see a role reversal between the Canadian and the U. S. economies. Part of it is there is a lot of headroom for the U. S. to catch up,” said Doug Porter, deputy chief economist at BMO Capital Markets.
Canada’s economy has certainly been losing steam in the last few months. The latest GDP data shows Canada’s economy grew just 0.1 per cent in October, while growth was flat in September and declined by 0.1 per cent in August.
The economists agreed that while Canada may lag the U. S. in economic growth, it would certainly benefit from a resurgent U. S., especially when it comes to exports.
Another topic discussed at the forum Friday was the Canadian housing sector. Craig Wright, chief economist at the Royal Bank of Canada, said Canada’s housing market was “cooling” rather than “collapsing.”
“I don’t think we’ll see a repeat of the U. S. housing crisis here,” he said.
But Avery Shenfeld, chief economist for CIBC World Markets, said Canada would still suffer “significant” economic consequences.
He said given that housing in Canada is about four per cent of gross domestic product, given a slowdown, about half a per cent could be knocked off economic growth this year.
“It’s not trivial,” he said. “If we have an economy running at two per cent, now it’s half a per cent less. It’s significant.”
Meanwhile, Canada posted the fourth highest trade deficit on record in November as shipments to Europe fell, suggesting the country’s economy is struggling to emerge from an exportdriven slump.
Canada recorded a $ 1.96 billion trade deficit, up from a revised $ 552 million gap in October, Statistics Canada said Friday in Ottawa. The shortfall was wider than all 21 forecasts in a Bloomberg survey of economists that had a median estimate of a $ 600 million deficit.