(March 15 – 12:05 ET) – Economists at the Bank of Nova Scotia are expecting increased consumer spending thanks to the “wealth effect” from asset price gains.
“Canadian consumers, who were trailing American spending trends through the 1990s, are in catch-up mode,” says Adrienne Warren, Scotiabank senior economist. “While the pick-up in spending growth has largely piggybacked on stronger employment and earnings, confidence is now being reinforced by a catch-up in asset prices, both for homes and investment portfolios.”
This expected uptick in spending has pushed Scotia’s expectations for real GDP growth up to 4.2% for 2000 and 3.3% for 2001. While the trend is evident already Scotia anticipates that it may take several years for this wealth effect to work its way through the economy, noting Canadians have a long way to go to catch up to their American cousins.
-IE Staff