Economists at Bank of Nova Scotia are lowering their 2015 growth forecasts for both Canada and the United States, following a slower than expected start to the year.
The bank has cut its forecast of U.S. GDP growth this year, from 2.6% to 2.2%, according to a new report.
This revised outlook follows a “sharp downward revision to first-quarter growth and a weaker-than-anticipated handoff to Q2,” the report says.
Nevertheless, the bank says that it continues to expect the U.S. economy to gain momentum over the remainder of the year, underpinned by solid consumer fundamentals and pent-up housing demand.
Scotiabank is also trimming its forecast for Canadian output growth this year from an-already modest 1.8% down to 1.6%, citing a “sharper-than-expected Q1 slowdown fuelled by oil sector cutbacks combined with a somewhat softer U.S. growth profile.”
The bank expects the economy to gain some ground in the second half, led by stronger U.S. demand and a weaker loonie, the report says but “lacklustre employment and wage gains will likely restrain retail and housing activity.”
Following on from its dimmer outlook for Canada overall, the bank has lowered its forecasts for most provinces, according to the report.
In Atlantic Canada, that the lack of significant job creation is expected to leave the region’s unemployment rate slightly higher, the report says.
Alberta is expected to see “positive, but very modest real GDP growth… with its new government’s preference for avoiding program spending cuts limiting some of the near-term downside risk.” according to the report
On the fiscal front, the provinces’ spring budgets generally “signalled fiscal restraint” for most provinces in 2015-2016, the report says.
“Over the next few years, the expected rise in provincial and municipal service fees towards full cost recovery will likely impact both households and businesses,” it says.