Tuesday, December 30, 2008

RBC reporting that Canada on course for recession

The Royal Bank of Canada, RBC, is reporting that Canada is heading for a recession in 2009. This seems to be a common prediction and will likely continue for at least the next one to two quarters.

This is what RBC reported


Canada on course for recession

- Canada, while somewhat insulated by a solid financial system, now faces a number of negative factors. With commodity prices slumping, the positive growth momentum in Canada's domestic economy will be challenged by erosion in the terms of trade that will dampen income growth next year and the recent widening in spreads and tightening in lending standards argue for slower household spending and a cut in business investment.

- We expect price pressures to continue to ease; the headline inflation rate is forecast to average 1.2% in 2009, one-half the estimated 2008 rate. The Bank of Canada's core inflation rate, which did not climb alongside the headline measure in 2008, is expected to hold steady at 1.6%.

- As a result, we now expect Canada's economy to contract in both the fourth quarter of 2008 and first quarter of 2009. On average, Canada's economy is still expected to eke out mild growth next year of 0.3%, half the pace of this year's estimated 0.6% increase and much slower than the 2.7% pace of 2007.

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