Canada to lag U.S. growth: Scotia Economics

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Stagflation is U.S. economists’ biggest fear, SIFMA says Keywords Economic forecasts Related news “We’re more accustomed in our longer history to under perform the United States,” said Holt, “and I think we’ll see a restoration of that pattern as we go forward over the next two to three years.” In terms of U.S. growth, Holt believes Thursday’s announcement of 2.8% annualized GDP growth is as “good as it’s going to get for some time.” Instead, the States is likely to see a return to the 1% growth range in the fourth quarter, predicted Holt, and will start to improve again in 2014. The leading cause of Canada’s expected low growth levels is the coming slowdown in the housing market. Said Holt: “I can’t see eeking out much greater growth out of a very, very mature point in the cycle.” The housing market is reaching the top its cycle, according to Holt, because homeownership, spending and debt levels are all at record highs. The coming slowdown, however, will not be a collapse on the scale of the U.S. housing crisis for several reasons, said Holt, including the fact that the Canadian mortgage market is fundamentally different from the States and Canadian banks remain well-capitalized. “Leverage at every stage of creation in Canada was fundamentally very, very different from the United States,” he said. “And what that means is when the momentum comes out of the volume side of the picture I don’t think you get the same vicious reversal of leverage in the Canadian context that you had in the U.S.” One point that will actually help Canada during this period of slow growth is that the U.S. economy is starting to pick up. “We’re very, very lucky to be able to deal with housing market froth at the same time our trading nation peers are in recovery mode,” said Holt. “And so that should have a bit of an insulating, shock absorber effect to froth in our housing market.” Fiona Collie Share this article and your comments with peers on social media Economy lost 68,000 jobs in May Facebook LinkedIn Twitter Canada is likely to see subdued economic growth over the next few years as the economy returns to the more traditional pattern of underperforming the U.S., said Derek Holt, vice president, Scotia Economics, at the 2013 MMI Canadian Wealth Advisory Solutions Conference in Toronto on Thursday. While Canada has outperformed the United States in terms of gross domestic product (GDP) growth in five of the past six years, said Holt at the event, historically Canada tends to underperform its southern neighbour. For example, in 10 years out of the past 30 years, the Canadian economy has underperformed the U.S. by one to three percentage points as well as falling short by a slightly less margin during several other years over that time period. OECD raises outlook for Canadian economic growth this year

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