Saturday, October 17, 2009

RBC feels our economy is on the rebound

This is another good news story from one of the major banks in Canada. RBC feels that our economy is on the rebound and should be moving at a very good pace in the next few quarters.

This is good news for a change!


I hope this finds you Happy and Healthy!

All the Best!


A. Mark Argentino
P. Eng. Broker
Specializing in Residential & Investment Real Estate

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Canada’s economy set for rebound

Special factors took the steam out of Canada’s GDP in July, but the stage is set for a decent rise in August. The special factors limiting July’s output were the tepid rebound in motor vehicles and parts output, temporary closures in the mining sector, unseasonably cool weather that cut into utilities output and a strike by municipal workers.

In 2010, we forecast growth of 2.6% with consumer spending growing by 2%. While Canadian household balance sheets are sounder than in the United States, the sharp drop in asset values and continued debt growth during the recession produced a rise in the debt-to-asset ratio and contributed to debt as a percentage of disposable income hitting an all-time high. Rising financial asset prices and a rebound in real estate values suggest that these ratios headed back down in the third quarter but will still limit spending growth in the near-term.

Another solid gain in manufacturing sales combined with a return to more normal conditions in other industries will provide support to August GDP and will be sufficient to see Canada’s economy record a modest increase in the third quarter.

The Bank of Canada has made a "conditional commitment" of a 1/4 per cent overnight rate "at least through the end of June of next year". In a recent speech, Governor Carney reiterated that this commitment was conditional on the performance of inflation relative to the Bank’s target. Based on our economic

forecast, we expect that the Bank will follow the prescribed policy route, with 50 basis point hikes likely in both the third and fourth quarters of next year.

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