Canada’s economy poised for growth, jobs may lag; RBC

Canada’s economy is poised for steady growth this year and next, though the outlook for jobs won’t improve much until 2011, according to a report by RBC Economics.

Gross Domestic Product will expand by 3.1% this year and 3.9% next, the report said. The unemployment rate is likely to stay around its current level of 8.4% before dropping to 7.7% next year, the bank said.

"An economic recovery is solidly taking root in Canada with the full impact of stimulus spending, historically low interest rates and improved credit markets all taking effect this year," said Craig Wright, senior vice-president and chief economist at RBC.

"Going forward, additional growth should be sustained by strength in the housing market and investment by the private sector, as corporations increase payrolls and investment."

Canada’s economy emerged from recession in the third quarter and growth accelerated into the fourth with GDP rising by a faster-than-expected 5%. The central bank is expected to begin raising interest rates from the second half of this year, taking some steam out of the housing market, one of the key drivers of recovery.

"We expect the market to slow by the second half of the year as interest rates begin to rise and affordability declines,” Wright said.

The strongest 2010 growth is likely to be in Newfoundland and Labrador at 4.1%, followed by Saskatchewan at 3.6%, RBC said. British Colombia’s economy will expand by 3.4%, while Ontario will grow by 3.3%. The Albertan economy will only expand 2.5% this year before strengthening to 4.4% next, it said.

The bank’s forecasts for the provinces differ from other recent reports, including one from the Conference Board of Canada, which put resource-rich B.C. in the lead for this year.

For the U.S., RBC expects GDP to increase by 2.9% in 2010 and 3.4% in 2011.