Scotia Economics has trimmed its Canadian and U.S. forecasts for the year ahead, amid a weakening global recovery.
In a new report, the firm says that it has pared its forecasts for Canadian and U.S. growth for the second half of 2012, and into 2013, “in light of the renewed weakening in global industrial activity, heightened financial market volatility and the subsequent negative spillover to consumer and business confidence.”
Real GDP is now expected to average just under 2% in Canada this year and next, and just over 2% in the United States.
The firm says that greater pent-up consumer and housing demand give the U.S. its slight edge over Canada for the forecast period. The outlook for business investment in both countries remains positive, it notes. Yet, it also expects weak global demand to dampen the export and manufacturing recovery, and increasing fiscal restraint to serve as a drag on overall activity.
It is also pushing back its expectation for interest rate hikes. Scotia says it now expects the Bank of Canada to tighten policy one quarter later, in the third quarter of 2013, due to the softening in Canadian and global conditions.
Scotia Economics has also modestly lowered its global real GDP estimate, “reflecting the intensifying debt strains in Europe, and the spillover effects internationally that have reduced industrial activity in more countries”. It says global growth is now forecast to expand 3.1% this year and 3.6% in 2013, which is down fractionally from last month’s assessment, and is still below consensus.