BMO Capital Markets has trimmed its forecast for the Canadian economy due to the U.S. government shutdown.
In a new report, the firm says that, while the current state of talks on the U.S. fiscal front “seems encouraging”, it is nevertheless lowering its forecast for Canadian GDP, citing fallout from the ongoing government shutdown. Its expectation of weaker U.S. growth in the fourth quarter is reducing its Canadian GDP growth projection for both the fourth quarter and the first quarter of 2014, to 2.1% and 2.2%, respectively. In turn, this is lowering its 2014 annual forecast a touch to 2.2%, it says.
“As we’ve mentioned a number of times, without firming U.S. growth, Canada will have difficulty growing much beyond a 2% pace,” it says. “And, the risks to the outlook remain on the downside, as the shutdown could drag on longer than anticipated, pulling growth in the U.S. and Canada down even further.”
This may also mean that tapering by the U.S. Federal Reserve Board is delayed further, “which points to an even longer period before the Bank of Canada eventually raises rates,” it says.
Additionally, the latest merchandise trade numbers indicate that, “for the fifth time in the past seven quarters, trade is poised to be a drag on the economy.” And, the latest jobs report wasn’t great either, it says.