The economic research firm Global Insight says that it is more pessimistic than most forecasters on the Canadian economy, but that it expects others to follow its lead.

Economic growth forecasts for 2007 for the United States are being revised upward, but those for Canada will be revised downwards, the firm predicts. Global Insight’s February forecasts call for 2.1% growth for Canada for 2007 and a considerably stronger 2.7% for the United States. The consensus of forecasts currently available has a slightly weaker forecast for the United States and a slightly stronger forecast for Canada for 2007, it reports.

“However, Global Insight is of the view that as other forecasters update their forecasts, as Global Insight has just done, the slight negative gap between Canada and the United States will widen,” it says.

“We have downgraded Canada’s expansion for this year partly because the initial level going into 2007 will be lower due to the tepid second half of 2006,” it says. “However, even the ongoing pace of growth within 2007 is now expected to be softer.”

“The reasons for weakness in Canada’s output growth, particularly in the face of strong employment gains, are not entirely clear at this point. Investment in machinery and equipment has been softer in recent months, however, and that trend is expected to continue. Consumer spending is also expected to be weaker, and more of that spending will be on imported goods in 2007,” it says.

“What is certain is that if the output data for Canada is in fact correct, Canada’s labour productivity has been very weak over the past year. This bodes ill for profit growth, wage growth, and/or competitiveness, as well as revenues available to governments for social programs and/or tax reduction,” it concludes.