(January 17 – 09:45 ET) – Canada will lead the G-7 in economic growth, according to TD Bank economists. “Canadians can look forward to a healthy rise in after-tax incomes this year, thanks to continued rapid employment growth, an acceleration in wage increases and additional income-tax cuts at the federal and provincial levels,” says Peter Drake, vice president and deputy chief economist at TD Bank.
“Disposable incomes in Canada are expected to rise by more than 5% this year, almost double the average rate of the past three years,” says Drake. TD forecasts real GDP growth of 3.5% and 3.0% in 2000 and 2001 respectively. The unemployment rate is expected to slip modestly to 6.8% by 2001, with disposable incomes rising 5.2% each year.
TD expects corporate profits to post another double-digit gain in 2000, boosted by rebounding commodity prices and strong demand. Along with the strong economy will come interest rate hikes though the bank cautions. It anticipates slight inflation acceleration, with the Consumer Price Index rising 2.3% this year and 2.2% in 2001. “With Canada’s economy now operating at close to full capacity, the Bank of Canada will not hesitate to raise interest rates in response to rate hikes by the U.S. Federal Reserve,” notes Drake. He anticipates 25 basis point hikes in each of February and March in both the U.S. and Canada.
On the heels of this growth, TD expects the loonie to rally to 72¢ US by the end of 2000, climbing another cent in 2001.
-IE Staff