<<< back to article list

Canada In For A Bumpy Ride In '07

Blog by | January 3rd, 2007


Canada In For A Bumpy Ride In '07: Growth Below trend

Thursday, December 21, 2006

Slowdowns in housing, government spending and exports have acted as a drag on the economy, the Canadian Chamber of Commerce said yesterday as it forecast "bumpy" growth next year -- sluggish in the first half before bouncing back in the second.

"Economic growth will be below trend in the first half of the year," is said, forecasting an annualized 2.2%-to-2.5% expansion. "But over the second half of 2007, it will return to a rate that is slightly above the potential growth rate at 2.8%."

Canada's long-running economic expansion slowed to an annual rate of less than 2% in the thrid quarter and will ahve difficulty returning to 2% in the last quarter, it said, noting it is well below the 3.6% rate of the first quarter of this year.

Meanwhile, evidence of that slwodown continued to mount with news that slumping auto sales have handed Canadian wholesalers their first back-to-back sales drop in two years.

Wholesale sales, which account for a bigger share of gross domestic product than the more widely watched retail sales, slipped 0.2% in October to $41,6 nillion, Statistics Canada reported.

"Most of the decline was caused by another significant drop in automotive sales, which have fallen continuously snice hitting a peak in July," it noted. "While the overall trend for the wholesale sector remains positive, it has eased somewhat over the past few months, in line with the general softening of the Canadian economy," it said, noting overall growth slowed to a 1.75 annualized pace in the third quarter, its slowest in three years.

Further clouding the outlook for Canada's economy was another Stats Can report nothing visits from the United States, Canada's largest tourism market, have hit a new low. "American residents made fewer than 2.3 million trips to Canada in October, the lowest monthly level for overall travel from the U.S. since recordkeeping started in 1972. Canada was also visted by fewer visitors from countries other than the U.S.," the report noted.

Concerns about border-security measures and delays are blamed in part for the steep drop in visits by Americans this year, and, to a lesser extent, declines in visits to the United States by Canadians.

Meanwhile, the chamber warned the slowdown in the United States weighs heavily on the outlook for the Canadian economy. And there's a risk the U.S. slowdown, and in turn Canada's, could be deeper than expected. Goods exports to the United States have hit a near two year low and the trade surplus with the United States a three-year low, the chamber noted.