Ottawa, ON — The Canadian economy bolted out of the recession early this year, but the current unsustainable rate of consumer spending and a fragile recovery in the United States will slow the rebound in the second half of 2010, according to the Conference Board’s Canadian Outlook-Summer 2010.
“Canadian consumers have recovered from the recession blues,” said Pedro Antunes, director, national and provincial forecast. “Consumer spending helped to get the economic ball rolling after the recession. However, spending has been outpacing income growth since the middle of last year, making the current pace unsustainable in the second half of 2010.”
The Canadian economy is expected to grow by 3.6% this year, with much of the gains coming in the first six months of 2010. The slowdown in the pace of recovery is expected to limit growth in real gross domestic product (GDP) to 2.9% in 2011.
The Canadian forecast depends largely on a rebound in US household spending, which remains fragile in the face of weak US employment and income growth. The European debt crisis continues to give global financial markets jitters, which adds uncertainty to a rebound in US demand.
Canada’s trade sector is expected to detract from overall growth this year, due largely to the tepid rebound by US consumers. The strength of the dollar will also hurt exports. With Canada raising interest rates ahead of the United States, the Conference Board forecasts the loonie to reach parity by the end of 2010.