The North American economy experienced positive growth in February despite ongoing uncertainty in Europe and China, reveals a report released Wednesday by BMO Harris Private Banking’
The report notes the U.S. economy continues to improve, despite the inability of U.S. politicians to avert sequestration, leading to the U.S. Treasury to withhold US$85 billion needed to run federal agencies.
“Differences in ideology are sidetracking U.S. policy makers from negotiating a compromise on the deficit, which industry reports suggest will significantly slow economic growth and damage confidence in the U.S. economy,” said Daniel Theriault, chief investment strategist, BMO Harris Private Banking. “But behind the scenes, both sides are working towards an agreement that will likely emerge over the next three to six months and further stimulate the economy.”
U.S. Employment grew by 157,000 new jobs in January, and manufacturing and non-manufacturing business activity was strong.
The economic picture is less positive across the pond. Europe returned to uncertainty in the wake of the anti-austerity Italian election results, Britain’s loss of its triple-A credit rating and troubling events in Spain, the report states.
“This volatile market environment will likely continue until governments in Europe start to focus on measures that will reduce debt and bolster growth,” said Theriault.
In Canada, companies in the mining and construction sectors have been reluctant to spend in the last few months, the report states. This has stalled the pace of business, and caused investors to grow wary.
The materials sector dragged down overall economic performance, an indication that a full export recovery is still in the early stages, the report notes.
“Canada’s export sector relies heavily on robust economies in the U.S. and China, neither of which has hit their stride yet,” said Theriault.
Favourable Canadian economic growth signs were also noted in the report, including the fact that the S&P/TSX equity index delivered respectable returns for February – 1.08%, continuing the momentum from January.