Cautious business spending and increased U.S. fiscal restraint will weigh on Canadian growth, says the ‘Economic and Financial Market Outlook’ 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,” says Craig Wright, senior vice-president and chief economist at RBC. “That said, financial conditions continue to support growth. As confidence recovers, business spending should accelerate, albeit at a less rapid pace than we saw in the early days of expansion.” RBC expects the Bank of Canada policy rate to remain at the current level for longer than previously thought. “The urgency to boost interest rates is now less compelling; concerns that low interest rates were fueling an untenable buildup in consumer debt are being alleviated because of the slowing pace of household debt accumulation,” says Wright. “RBC forecasts the overnight rate will remain at one per cent in 2013, with conditions likely to support a gradual increase starting in mid-2014.
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