Internal Threats Add To Headwinds

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    Internal threats to Canada’s economic growth are expected to play a greater role next year, adding to the headwinds from Europe, the U.S., and China, says Russell Investments. Its ‘2013 Annual Global Outlook’ says the domestic economy, emerging from an “underwhelming” 2011, is expected to be further tested by a lethargic housing market, weary consumers, and waning corporate profitability. A slower housing sector has an impact on private consumption, which represents more than half of Canada’s GDP. Furthermore, after a decade of running up their debt loads, Canadian households are starting to tackle their balance sheet and are becoming thriftier. With slowing retail sales, the forecast believes Canada’s economy will grow between 1.7 per cent and two per cent with risks skewed towards the lower number. As well, it says the Bank of Canada will leave the overnight target rate unchanged, although Government of Canada 10-year bond yields will be modestly higher, in the 1.9 per cent to 2.2 per cent range. The global forecast for 2013 predicts a positive, albeit volatile investment environment, noting that investors can expect a modest global recovery, driven primarily by a continuation of U.S. and Chinese economic growth.