OTTAWA — It may not be smooth sailing after all for the Canadian economy.
Many positive outlooks for growth in 2014 have been buoyed by a stronger-than-expected performance in the third-quarter of last year — along with a pickup in the global economy overall — but some analysts are sounding a more pessimistic tone.
“The consensus view that economic growth will accelerate this year is misplaced,” say economists at Capital Economics.
“While exports and business investment should improve modestly, we anticipate this will be more than offset by weaker housing construction, triggered by a pullback in the overbuilt condo market, and more cautious household consumption growth,” the Toronto-based independent global research group said in a report Friday.
“Although a downshifting housing recovery will keep performance from matching the U.S., faster growth there will lend support, encouraging the Bank of Canada’s hoped-for rotation from consumers and housing to trade and investment.”
Not necessarily so, say Capital economists Amna Asaf and David Madani.
In fact, they are predicting much weaker growth in Canada this year, despite the upturn in the U.S. and elsewhere.
“Our view stands in contrast to the more rosy consensus forecast that GDP growth will accelerate to 2.3% in 2014,” they said in their report, predicting a much slower 1.5% pace this year.
“With U.S. economic growth strengthening, Europe emerging from recession and emerging Asia [economies] showing signs of recovery, we certainly expect Canada’s exporters to fare better this year,” they wrote.
“But the growing gap between non-commodity exports and U.S. economic activity is bothersome, convincing us that a full export recovery will take much longer than normal.”
“We expect net exports and business investment to improve only gradually, contributing positively, but modestly, to GDP growth in 2014.
“In addition, negative knock-on effects to household confidence and consumer spending are likely to occur, as households’ faith in housing as a stable investment is shaken,” they said.
“Falling new home sales and rising unsold housing inventory have already prompted developers to scale back the number of new condo projects.”
Canadaâ€™s economic growth outlook too â€˜rosy,â€™ says report | Financial Post