Scotia Economics is bumping up its already above-consensus forecast for Canadian real gross domestic products this year by 0.2% to 3.2%.

The bank says that the upward revision “reflects the stronger economic momentum developing at the turn of the year”, as fourth-quarter output growth came in at 5.0% — above its expectation of a 4.2% advance — following an upwardly revised third-quarter growth rate of only 0.9%.

“The stronger handoff reflects a more robust performance in consumer spending and residential construction — sectors that have benefited from the aggressive and sustained monetary easing, and more recently, from the turnaround in hiring conditions,” it says, adding that it now expects that Canada’s jobless rate will average 8.2% in 2010 and 8.0% in 2011, a 0.1 percentage point reduction in both years from its previous outlook.

Still, Scotia is maintaining its below-consensus real GDP estimate for 2011, which is expected to average 2.8%. It is also keeping its U.S. forecast at 3.6% growth this year, sliding to 2.6% in 2011.

“Despite output growth averaging around 3.0% this year and next in both Canada and the United States, domestic-led activity is expected to remain much stronger north of the 49th parallel, and the best in the G7,” Scotia says.

“Final domestic demand — which aggregates consumer spending, business investment, residential construction, and government expenditures — is forecast to average roughly 3.25% in Canada, higher than overall growth, and a full percentage point greater than in the United States. Even excluding the multi-year ramping up of government expenditures to underpin the recovery, Canada’s private sector-led domestic activity is likely to expand an average of 3.0% though the end of 2011, versus an expected gain of 2.25% south of the border.”

Scotia also continues to expect that the Federal Reserve and the Bank of Canada will begin to hike rates in the third quarter of this year, with a cumulative increase of two percentage points by mid-2011 pushing their bellwether overnight rates up to 2.25%.

Elsewhere, Scotia is raising its GDP growth estimate for Mexico to an average of 4.2% this year from its previous call of 4.0%. It’s also lifting next year’s average increase to 3.5% from the prior forecast of 3.1%.

Scotia Economics also now expects real GDP in India to advance 7.5% and 7.0% respectively this year and next, one-half a percentage point higher than in the previous outlook for 2010 and 2011. It has also raised the growth estimate for South Korea this year by 0.7 percentage points to 4.7%, and have kept next year’s output gain pegged at a healthy 4.5%.

In Europe, it has lifted its 2011 forecast for German output growth to an average of 1.3% from a prior expectation of 1.1%.

Throughout South America, it is maintaining its forecasts for output growth this year, with Brazil continuing to lead the region with real GDP estimated to average around 5.0%. However, it has reduced the 2011 growth forecast for Brazil by 0.5 percentage points to 4.5%, “a reflection of the projected loss of momentum throughout the global economy.”

IE