News and resources for Canada's top financial advisors
Est. 1998
Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com
(06/22/07)
Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com
(06/22/07)
Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com
(06/22/07)
 |
The Canadian economy will continue its winning ways, even if the Bank of Canada tightens interest rates in the coming months, according to the latest forecasts from RBC Economics.
After a torrid start to 2007, the pace is expected to ease, but growth should continue through the remainder of 2007 and into 2008.
“Canada’s economy gathered steam in the first quarter with an annualized growth pace of 3.7%, supported by a strong domestic economy,” said Craig Wright, vice-president and chief economist, RBC. “While overall economic growth will remain robust, the trade sector will continue to weigh on growth as the strong Canadian dollar boosts imports and restrains exports.”
On a national level, the economy should grow by 2.6% over 2007, Wright says, with 2008 expected to turn in a rate of 2.9% growth.
Consumers are expected to spend at a slower pace next year, but strong balance sheets should lead to more capital spending on the corporate side, although the high value of the dollar remains a risk to corporate profits.
“We expect the Canadian dollar to remain elevated, trading to a high of 96.15 US cents in the third quarter, ending 2007 at 94.35 US cents and 89.30 US cents at the end of 2008,” says Wright.
The Bank of Canada is expected to stick to its mandate of controlling inflation, and raise the overnight rate by 75 basis points over the coming six months, with another 25-basis-point increase in 2008.
That may be bad news for the manufacturing sector, but Wright’s opposite number at CIBC World Markets, Jeff Rubin, points out that the Canadian manufacturing sector has already lost its significance to the overall economy.
“It’s time Canadian-dollar short-sellers gave up the notion that there is still a manufacturing sector in Canada left to protect,” he wrote in a research note issued last week. “The loss of 275,000 factory jobs since 2002 has turned out to be nothing more than a footnote in a Canadian labour market that has seen the creation of one-and-a-half million jobs in the rest of the economy, and now sports the lowest unemployment rate in over three decades.”
He compares the decline of manufacturing to that of agriculture, which once accounted for a quarter of all jobs, and points out that Canada has yet to catch up to America’s conversion to a services-based economy.
“Manufacturing’s share of total employment will soon fall to a post-war low of less than 10%, a threshold the U.S. economy is already at,” he wrote.
Weakness in the American economy remains a threat to Canadian prosperity as well, but the U.S. is already showing signs of strength after a poor first-quarter performance. RBC forecasts 2.2% growth south of the border for 2007, which should improve to 2.9% in 2008 — although that prediction marks a downward revision by the bank.
Interest rates in the U.S. are forecast to remain steady through the rest of 2007 at 5.25%, with the Federal Reserve raising its Fed funds rate by 50 basis points by the middle of 2008.
Back in Canada, RBC predicts Newfoundland and Labrador will lead the rest of the provinces in terms of growth for the balance of the year at a whopping 7.5% but that the resource boom will fade in 2008 and drag growth lower. Alberta too should expect a slower growth rate, although it will still likely turn in the top performance in 2008, at about 4%.
“Strong fundamentals have been driving Alberta’s economy for the past year with annual wage growth tracking at 5%, unemployment hovering near 3% and strong net provincial migration,” says Wright.
RBC’s forecasts for real GDP growth in 2008 for the provinces are as follows:
Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com
(06/22/07)
|
The Canadian economy will continue its winning ways, even if the Bank of Canada tightens interest rates in the coming months, according to the latest forecasts from RBC Economics.
After a torrid start to 2007, the pace is expected to ease, but growth should continue through the remainder of 2007 and into 2008.
“Canada’s economy gathered steam in the first quarter with an annualized growth pace of 3.7%, supported by a strong domestic economy,” said Craig Wright, vice-president and chief economist, RBC. “While overall economic growth will remain robust, the trade sector will continue to weigh on growth as the strong Canadian dollar boosts imports and restrains exports.”
On a national level, the economy should grow by 2.6% over 2007, Wright says, with 2008 expected to turn in a rate of 2.9% growth.
Consumers are expected to spend at a slower pace next year, but strong balance sheets should lead to more capital spending on the corporate side, although the high value of the dollar remains a risk to corporate profits.
“We expect the Canadian dollar to remain elevated, trading to a high of 96.15 US cents in the third quarter, ending 2007 at 94.35 US cents and 89.30 US cents at the end of 2008,” says Wright.
The Bank of Canada is expected to stick to its mandate of controlling inflation, and raise the overnight rate by 75 basis points over the coming six months, with another 25-basis-point increase in 2008.
That may be bad news for the manufacturing sector, but Wright’s opposite number at CIBC World Markets, Jeff Rubin, points out that the Canadian manufacturing sector has already lost its significance to the overall economy.
“It’s time Canadian-dollar short-sellers gave up the notion that there is still a manufacturing sector in Canada left to protect,” he wrote in a research note issued last week. “The loss of 275,000 factory jobs since 2002 has turned out to be nothing more than a footnote in a Canadian labour market that has seen the creation of one-and-a-half million jobs in the rest of the economy, and now sports the lowest unemployment rate in over three decades.”
He compares the decline of manufacturing to that of agriculture, which once accounted for a quarter of all jobs, and points out that Canada has yet to catch up to America’s conversion to a services-based economy.
“Manufacturing’s share of total employment will soon fall to a post-war low of less than 10%, a threshold the U.S. economy is already at,” he wrote.
Weakness in the American economy remains a threat to Canadian prosperity as well, but the U.S. is already showing signs of strength after a poor first-quarter performance. RBC forecasts 2.2% growth south of the border for 2007, which should improve to 2.9% in 2008 — although that prediction marks a downward revision by the bank.
Interest rates in the U.S. are forecast to remain steady through the rest of 2007 at 5.25%, with the Federal Reserve raising its Fed funds rate by 50 basis points by the middle of 2008.
Back in Canada, RBC predicts Newfoundland and Labrador will lead the rest of the provinces in terms of growth for the balance of the year at a whopping 7.5% but that the resource boom will fade in 2008 and drag growth lower. Alberta too should expect a slower growth rate, although it will still likely turn in the top performance in 2008, at about 4%.
“Strong fundamentals have been driving Alberta’s economy for the past year with annual wage growth tracking at 5%, unemployment hovering near 3% and strong net provincial migration,” says Wright.
RBC’s forecasts for real GDP growth in 2008 for the provinces are as follows:
Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com
(06/22/07)
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