BMO Nesbitt Burns chief economist, Dr. Sherry Cooper, sees a U.S. economic boom on the way, and expects Canada to be swept along with it.

In a statement issued Friday, Cooper notes that the Canadian economy has been battered this year, with the appreciating dollar, SARS, the ongoing lumber dispute, soft global demand, the beef-export ban, the Ontario blackout and the B.C. fires. However, considering all these shocks, the economy has held up well, and the underlying trade picture remains healthy, Cooper says.

Cooper points out that the TSX is up 15% year-to-date, and it has risen more than 30% from its cyclical low posted nearly one year ago. “Gains in the Toronto Stock Exchange tend to foreshadow an acceleration in U.S. industrial production, and the manufacturing data now confirm a turnaround,” she says. “We are witnessing the early days of a meaningful global economic upturn, evidenced by the rise in commodity prices, and other leading economic indicators.”

Cooper also notes that the OECD leading indicator is up over 5% in the past six months, Japan is recovering, China is booming, and Germany appears to be reviving. “This is great news for the Canadian export sector,” she says.

Domestically, Canadian consumers are in relatively good shape, Cooper says. “Employment growth has been quite strong in the past few years, and although it has weakened considerably in recent months, consumer confidence levels are high, real personal income growth is strong, and interest rates are low. Housing markets remain red hot, despite the recent rise in mortgage rates.”

Cooper allows that the Bank of Canada stands ready to cut rates for the third time this year if necessary, but she doesn’t expect that this will be required.

There are risks to her rosy outlook, she concedes. These include possible terrorist attacks, and doubts about the sustainability of the U.S. rebound. However, she is betting on a sustained and broadening recovery in U.S. business spending now that profit margins have returned to historical norms. Cooper also expects to see the consumer bolstered by a turnaround in the jobs market.

“So the Canadian economy faces a solid outlook, fuelled by the revival of growth around the world and considerable upside momentum south of the border,” she concludes.