Newspaper article The Canadian Press

Housing Correction to Show Economic Growth to 1% This Year, Says Forecaster

Newspaper article The Canadian Press

Housing Correction to Show Economic Growth to 1% This Year, Says Forecaster

Article excerpt

Economy braking to 1% growth: economist

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OTTAWA - A leading international forecasting firm says Canadians should brace for tough economic times lasting another two years, lifting the jobless rate once again beyond eight per cent and setting back Ottawa's plans to balance the budget.

In one of the gloomiest forecasts issued on the Canadian economy since the recession, Capital Economics predicts a sharp and protracted housing correction, in conjunction with muted business investment and government austerity, will keep Canada's economy in stall mode throughout 2013 with a one per cent growth rate, only improving slightly to 1.3 per cent in 2014.

That's half the current Bank of Canada estimate on both years, and well below the 1.6 per cent consensus used by Finance Minister Jim Flaherty in the March budget for the current year.

"Canada's economy has lost considerable momentum and signs unfortunately point to continued slow growth ahead," says the new outlook.

"With the housing downturn intensifying, business investment intentions softening and government plans to restrain spending, we expect GDP (gross domestic product) growth of only one per cent in 2013 and 1.3 per cent in 2014."

In an interview, the firm's chief Canadian economist David Madani agreed that his view is darker than most, but noted the consensus -- the average of forecasts -- has been steadily dropping for months and coming closer to his position.

And recent indicators all point to weak growth, he added. Job creation for the first three months of the year has been non-existent. In fact, there has been a net loss of about 26,000 jobs, while exports remain weak.

On Tuesday, the Canada Mortgage and Housing Corp. reported housing starts inched up to 184,028 annualized in March from the previous month, but were still 13.6 per cent below a year ago. As well, Statistics Canada said February building permits for residential construction fell 7.2 per cent.

Madani said where he differs from many other economists is that he believes Canadians are in for a rough ride in the housing market, one of the pillars of economic growth until recently. …

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