This quarterly economic forecast examines the short-term economic outlook for Canada – all major components including consumer expenditures, housing, government, non-energy business investment, and trade. The outlook for the financial, labour, and energy markets is also given along with costs and prices. The U.S. economic outlook is presented in a separate section.
Canadian Outlook Economic Forecast: Summer 2005
Canadian Outlook Economic Forecast: Summer 2005
Canadian Economic Analysis
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- Consumer spending forged ahead in the first quarter of 2005, posting annualized growth of 6.3 per cent.
- Despite strong domestic demand, real GDP growth will be limited to 2.5 per cent in 2005 by a steep erosion in the real trade balance.
- Signs of inflation remain subdued, but the Bank of Canada is still expected to start tightening monetary policy. Interest rates should start heading up in October.
- The Fed is much further along on removing stimulus; shortterm rates have come up 200 basis points and are forecast to dampen U.S. real GDP growth to 3.5 per cent in 2005.
- Softened earlier this year by political uncertainty and a strong U.S. economy, the loonie has rallied recently, in line with our forecast of US$0.80 for 2005.
- The Liberal–NDP alliance provides another significant boost to government spending; on a public accounts basis, federal program spending is nearing double-digit growth.
- Business inventories continued to build for the third consecutive quarter, but strong wholesale and retail activity has kept the economy-wide inventory-to-sales ratio stable.
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