Canada's economy grows at fastest pace in a decade: RBC
Economics
Canadian and U.S. forecasts revised higher for 2010 although
European debt crisis presents potential risks to the global
recovery
TORONTO, June 10, 2010 — Canada's economy is
set for rapid growth in 2010 with real GDP projected to grow
by 3.6 per cent reflecting strong domestic demand and increased
job creation, according to the latest Economic Outlook report
from RBC Economics. Canada's real GDP grew at 6.1 per cent
in the first quarter, the fastest pace in over a decade.
"Canada's economy continued to surge ahead as domestic
demand was backed by increases in consumer, housing and government
spending," said Craig Wright, senior vice-president and
chief economist, RBC. "Looking ahead, positive signs
in the job market indicate that the recovery will continue
in the near term, as private investment increases following
a sharp decline during the recession and core inflation remains
on target."
The economy should continue to show gradual improvement as
businesses rebuild inventories following a sharp reduction
during the recession. Unemployment rates are expected to average
8.0 per cent in 2010 (down from 8.4 per cent in the previous
Outlook) before falling to 7.3 per cent in 2011 (down from
7.7 in the previous Outlook).
GDP is expected to rise 3.5 per cent in 2011 (down from 3.9
per cent in the previous Outlook). RBC expects core inflation
rates to remain just below two per cent, as the Bank of Canada
slowly reduces the amount of policy stimulus and raises interest
rates.
"Stronger-than-expected economic data and higher inflation
have reduced the need for emergency low interest rates, although
uncertainty arising from the European debt crisis adds an
element of caution to further rate increases," added
Wright.
The report indicates that the global economic recovery remains
on track despite recent volatility associated with European
debt. World growth forecasts have been revised higher in 2010,
as the European bailout package alleviated some concerns about
the region, although investors remain cautious. Eurozone GDP
growth is forecasted to be 0.8 per cent in 2010 and 1.7 per
cent in 2011.
RBC expects U.S. GDP to increase by 3.1 per cent in 2010
and 3.4 per cent in 2011. The report notes that a surge in
consumer spending and continued business investment in the
U.S. fuelled a three per cent increase in the first quarter,
at an annualized rate.
According to the report, recent fluctuations in the value
of the Canadian dollar have been impacted by shifting views
on the European debt crisis. As these concerns ease throughout
the summer and fall, RBC projects that the loonie will be
close to parity with the greenback. Beyond this, the Canadian
dollar is projected to depreciate gradually through 2011.
Among Canadian provinces, economic growth in 2010 will be
boosted by gains in Newfoundland and Labrador (4.1 per cent),
Saskatchewan (3.8 per cent), B.C. (3.5 per cent) and Ontario
(3.5 per cent). Growth in Alberta will rise 3.1 per cent this
year but strengthen to 4.2 per cent in 2011, the second highest
rate of growth behind Saskatchewan (at 4.4 per cent).
A complete copy of the forecast is available as of 8 a.m.
EDT, at www.rbc.com/economics/market/pdf/fcst.pdf.
A separate publication, RBC Economics Provincial Outlook,
assesses the provinces according to economic growth, employment
growth, unemployment rates, retail sales and housing starts.
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For more information, please contact:
Craig Wright,
RBC Economics Research, (416) 974-7457
Paul Ferley,
RBC Economics Research, (416) 974-7231
Matt Gierasimczuk,
RBC Media Relations, (416) 974-2124
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