In its monthly Global Forecast Update entitled Rebooting Growth released last Thursday, Scotia Economics raised its projections – indicating that the global economy is on the verge of crossing over from recession to recovery. The report also forecasts that the Bank of Canada and the US Federal Reserve will begin raising interest rates as early as the first quarter of next year.
“Although the restructuring and retrenchment underway in a number of key sectors and regions will remain a significant drag on the pace of activity, strong cyclical forces are providing much-needed impetus to growth,” said Warren Jestin, Scotiabank Chief Economist. “Canada and many other countries around the world are expected to piggyback on the renewed momentum being generated by the globe’s primary economic engines, the United States and China. The recovery should become increasingly more broadly based, with the likelihood of accelerating economic gains through the balance of this year extending into 2010.”
Canada’s economy should be buoyed by strengthening demand in the United States and internationally for manufactured and commodity-related products, although the nation’s performance will likely lag the upturn because of competitive issues, including a stronger currency.
According to the report, even with the globe’s output growth turning positive in the second half of the year, the contraction in worldwide real GDP in 2009 is still likely to average 2.7%, a post-war record. But building upon the strengthening economic momentum, global output growth is now expected to average 2.6% in 2010, a roughly half-percentage point higher than Scotia Economics’ previous forecast.
Residential construction in Canada increased in May – yet another positive development for the housing market. Housing starts across the country rose more than 9% in May to 128,400, seasonally adjusted and at an annual rate, from 117,600 in April, CMHC said Monday.
“Housing starts data for May from CMHC provided us with the first sign that a bottom might be forming in Canadian home building activity,” said Toronto-Dominion Bank economist Pascal Gauthier.
The increase was broad-based, including both single homes and multiple units such as condominiums, and was better than economists had projected.
Housing starts surged in Ontario and the Prairies, and rose more modestly elsewhere, although construction declined in British Columbia, New Brunswick, and Newfoundland and Labrador. – Globe and Mail
Consumer confidence has climbed to its highest level in 15 months as Canadians become increasingly assured that better economic times are ahead, a Harris/Decima poll showed last week.
The cloud of pessimism that followed the economic collapse of 2008 began to evaporate from February through June, with the percentage of people anticipating hard times to come falling by half from 59% in February to 29% in June, the poll showed.
The resurgence in public sentiment – a reading of 78.5, the highest since February 2008 – also showed a doubling, from 10% to 20%, in the number of people optimistic about the outlook for 2010.
Canadians’ longer-term outlook also rose, with 51% expecting positive results over the next five years, compared with 39% in February. Also, the number of Canadians who feel it is a good time to make a major purchase rose from 41% to 49%. – Financial Post
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