Global growth is expected to remain modest, but many economists and investors are more confident about the economy now than they were a year ago.
This is true even in the troubled U.S., where the economy is supported by the recent housing rebound, a better credit market for businesses and falling unemployment.
Yet the forecast for our friends south of the border may change if lawmakers are unable to reach an agreement on the fiscal cliff. The deadline is only hours away, and absent a deal the U.S. economy could nosedive into recession. On the plus side, The Washington Post reports top lawmakers are optimistic they’ll have an agreement before midnight.
Both RBC and the Bank of Canada have predicted growth of more than 2% for Canada in 2013.
Factors like struggling emerging markets and the flailing Eurozone will impact market movement, but RBC’s Craig Porter says he sees the light at the end of the tunnel.
In a recent report, he said the global economy will start accelerating again. Porter added consumers, resources and business investment will Canada’s main economic drivers throughout the next year.
Some financial experts even predict Europe is becoming a viable market for investors, with BMO economists pointing to how Mario Draghi paved the way to future recovery after committing to preserve the Euro in July and unveiling the Outright Monetary Transactions plan in September.
Read: Time to buy in Europe
In terms of natural resources, RBC says the western provinces will primarily boost growth, and Ernst & Young predicts companies can look forward to trends like growing global demand and foreign interest.
Turning to the consumer, sentiment across the country is stable. A Harris/Decima-Investors Group survey found Canadians are open-minded about the state of the economy moving into 2013.
Most are more confident their finances will improve this year, since they’ve cut spending. And though household debt has hit an all-time high, it’s increasing more slowly since one-third of Canadians have committed to reducing their amounts owing.
Not all reports are optimistic, however. CIBC, BMO and Desjardins have all scaled back their forecasts for the coming year, and expect growth to occur in 2014 and beyond. Each expects growth of less than 2% in 2013, and predicts global markets will continue to struggle.
Read the banks’ forecasts:
Unemployment fell in the U.S. and Canada in November, though, with the U.S. rate hitting its lowest level since 2008 and Canada’s falling by 0.2%. An October survey also called for raises for all Canadians next year, given that inflation is stable.
Finance-theory pioneer Eugene Fama warns inflation is imminent, on the other hand, and adds people have to be careful about choosing investments and managers as they tweak their portfolios. Though inflation has only caused rising food prices so far, clients should be wary.
As for the loonie, reports are mixed. One economist told The Globe and Mail the dollar would fall below 90 cents in 2013, but a recent Scotiabank report offers a brighter forecast.
It says, “A strong triple-A rating, an established fiscal plan, strong external inflows, commodity abundance and strong trade ties with the U.S. should all be factors supporting the currency.” It predicted the dollar would remain stable at around 97 cents through the year.