Bullish outlook on growth

Canada’s recovery is getting a vote of confidence from economists at the Royal Bank, who in a new report judge the economy sufficiently resilient to withstand turbulence from abroad. The RBC’s new quarterly forecast anticipates the economy will rebound to 3.1 per cent growth this quarter, which ends in June, and record a 2.6 per cent gain in gross domestic product overall for both 2012 and 2013.

OTTAWA — Canada’s recovery is getting a vote of confidence from economists at the Royal Bank, who in a new report judge the economy sufficiently resilient to withstand turbulence from abroad.

The RBC’s new quarterly forecast anticipates the economy will rebound to 3.1 per cent growth this quarter, which ends in June, and record a 2.6 per cent gain in gross domestic product overall for both 2012 and 2013.

But fresh data from the Conference Board suggests headwinds from abroad are already impacting Canada’s corporate sector.

The board’s May index on industry profitability found 13 of 49 industries reporting a decline in profitability and several that had been posting strong increases at the beginning of the year now showing a slowdown.

“The weaker profitability outlook is linked to the ongoing European debt crisis,” the think-tank said, also citing slowing growth in emerging markets and depressed prices in the commodities that Canada sells to the world.

The RBC economists acknowledged the external difficulties and have incorporated a slower 3.5 per cent global growth profile for this year. But they are buoyed by Canada’s strong fundamentals and believe policy-makers will be successful in preventing a European financial meltdown.

“We’re relatively bullish,” said Craig Wright, RBC’s chief economist. “On balance, conditions for growth are positive, supported by a continuation of a low interest rate environment and a Canadian financial sector that is healthy and ready to provide credit.”

Wright said the recent bad news has dampened confidence but has not changed the overall outlook.

“It’s still basically a risk story,” he said of Europe. “In a sense it’s more of the same: we get dragged to the edge of the cliff and then get dragged back.”

The other risks the bank says must be averted are the possibility of a harder than expected landing for China, and the danger that political gridlock in the U.S. will prevent a compromise to extend stimulative fiscal measures beyond this year.

The RBC’s view of the economy is at the upper limit of private sector economists’ range, as well as being above the Bank of Canada’s 2.4 per cent growth expectation for both years.

Last week, the central bank signalled it may downgrade its own forecast in the future. In a statement, it noted that “global economic growth has weakened,” citing European debt problems and weaker than expected performances in emerging markets, the U.S. and even Canada, which recorded a disappointing 1.9 per cent growth rate in the first quarter.

Last Friday, Statistics Canada confirmed that the strong job gains seen in March and April had petered out in May.

The RBC, however, sees last month’s tepid 7,700 jobs increase as cementing expansion in the previous two months since there was no reversal.

The economists attribute the soft first quarter to temporary factors — a mild winter that reduced demand on utilities and temporary shutdowns in both energy and mining production facilities.

They believe the economy will catch up in the second quarter, noting the outsized 140,000 employment increase recorded in March and April.

RBC sees jobs growth continuing in the next two years, taking the unemployment rate from 7.3 per cent at present to 6.9 at the end of 2013.

Continuing, if modest, growth in the United States, along with domestic strength in housing, consumer spending and business investment will help the Canadian economy stay on the path to recovery, the RBC said.

Given the positive growth, Wright said he expects the Bank of Canada will start raising interest rates later this year.

Meanwhile, the report cautions that growth will not be evenly spread.

The picture is marred somewhat by a deepening East-West divide, with resource-rich Alberta and Saskatchewan benefiting from the commodities boom with near four per cent growth rates.

Meanwhile, Quebec and all four Atlantic provinces will be under two per cent this year, with only Nova Scotia and New Brunswick getting above that level next year, RBC said.

Provincial forecasts for 2012 and 2013 are:

— Newfoundland and Labrador 1.9, 3.4.

— Prince Edward Island 1.8, 1.9

— Nova Scotia 1.6, 3.2

— New Brunswick 1.6, 2.1

— Quebec 1.6, 1.9

— Ontario 2.5, 2.4

— Manitoba 3.1, 3.0

— Saskatchewan 3.7, 3.9

— Alberta 4.0, 3.9

— British Columbia 2.6, 2.9

Just Posted

Maxime Bernier reaches out to Red Deer

Voters looking at The People’s Party of Canada

Rocky-area widow pleads for better cardiac treatment for Central Albertans

Lillian Hay wonders if her late husband Grant would have survived with local cardiac catheterization

Festival of Trees lineup announced

Popular event has raised millions for Red Deer Regional Hospital Centre

Maskwacis Mall has gone solar

Ermineskin Cree Nation receives provincial funding for project

Chefs de mission arrive to check Winter Games progress

Visitors will check on venues, accommodations and food services and transportation plans

WATCH: Barbecue in support of Red Deer Food Bank

The sun came out for the sixth-annual Feed the Need community barbecue… Continue reading

Black communities seek cannabis amnesty as pot legalization nears

OTTAWA — Members of Canada’s black communities are praising the Liberals for… Continue reading

Goodale tours Ottawa area destroyed by tornado, says feds ready to provide help

DUNROBIN, Ont. — Canada’s public safety minister says the federal government is… Continue reading

Province reports first decrease in child welfare numbers in 15 years

WINNIPEG — The Manitoba government says the number of kids in the… Continue reading

Woman says boyfriend pressed her to ‘produce a baby’

FARGO, N.D. — A North Dakota woman convicted of killing her pregnant… Continue reading

Defence focuses on behaviour of teen killed by Chicago cop

CHICAGO — Lawyers for a white Chicago police officer on trial for… Continue reading

Washington wants Canada to improve spill plan for U.S. spur of Trans Mountain

OLYMPIA, Wash. — Washington’s Department of Ecology wants the Canadian government to… Continue reading

National Transportation Safety Board to determine cause of Air Canada close call

Video captured the moment that an Air Canada jet flew off course… Continue reading

Most Read