Glory days may be over, economy may never fully recover

Bank of Canada governor Mark Carney says the U.S. economy could take years to recover from its current weak state — and may never return to its glory days.

OTTAWA — Bank of Canada governor Mark Carney says the U.S. economy could take years to recover from its current weak state — and may never return to its glory days.

“The nature of the U.S. recovery, it’s going to take a number of years before they get back to the U.S. that we used to know,” Carney told CTV’s Question Period.

“In fact, they are not in our opinion ultimately going to get back fully to the U.S. we used to know.”

The weakness south of the border is costing the Canadian economy $30 billion annually in lost exports, according to Carney.

And while the central bank is predicting a 0.6 per cent hit to the Canadian economy — worth about $10 billion — from the European economic crisis, Carney says consumer spending and business investment will prevent Canada from sliding backwards.

Those two sectors will be key in countering the slowdown outside Canada and government austerity measures at home, said Carney.

“We see (growth) coming from the household sector, consumption continuing to grow around two per cent, more activity in housing than we previously had thought,” he said.

“And then, importantly… is business investment still growing at a solid pace.”

Carney also echoed warnings from Ottawa that measures could be taken to reduce risks of a housing price bubble in Canada.

Last week, federal Finance Minister Jim Flaherty warned that he could take action to prevent prices from skyrocketing, particularly in the Toronto and Vancouver markets.

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