Canadian Outlook Economic Forecast: Winter 2005

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.

Document Highlights

• Weaker net exports will restrain the Canadian economy to 2.5 per cent growth in 2005
• The Bank of Canada will hold off on interest rate hikes until the fall of 2005
• Higher interest rates south of the border will slow consumer spending and allow U.S. real GDP growth to ease from 4.4 per cent in 2004 to 3.5 per cent in 2005
• Easing oil prices will take some pressure off the Canadian dollar, which is expected to average $0.79 U.S. in 2005
• Housing activity will remain strong in 2005 but will come down from the 16-year high, easily topping 230,000 units in 2004
• The buildup of business inventories in 3Q 2004 largely reflected an influx of high-end imported vehicles