OTTAWA - Canadian consumers will keep the economy out of recession this year despite the sharp U.S. slowdown, the Conference Board of Canada says.
The economic think-tank's spring outlook presents a far rosier view than many other forecasters or the federal budget, predicting growth at a relatively robust 2.2 per cent.
Last week, the Royal Bank of Canada projected a 2008 national growth rate of 1.6 per cent, and Toronto-Dominion Bank earlier sharply revised its outlook down to 1.1 per cent. The federal Finance Department estimated in the February budget that Canada's growth would slow to 1.7 per cent this year after advancing 2.7 per cent in 2007.
But the Conference Board believes that with a record number of Canadians having jobs, wages rising and interest rates falling, consumers will continue to spend freely, undaunted by what's happening in the U.S. or in the troubled manufacturing sector at home.
"Canada's household sector seems oblivious to the concerns that the slowdown will spread north,'' said economist Pedro Antunes, who authored the report.
"In sharp contrast to what is happening in the United States, Canadian consumers opened wide their wallets and purses over the fourth quarter. As 2008 goes on, we expect that households will continue to spend strongly this year.''
Because of the high dollar and expected mild recession in the U.S., Canada's export-based manufacturing and forestry sectors will have a "miserable'' year in 2008, the Conference Board says.
Net exports are expected to decline by $27 billion this year, taking a 2.3 per cent bite out of gross domestic product. Most of this will be borne in Ontario and Quebec, Canada's manufacturing heartland.
Where the Conference Board and many others diverge is in their assessment of the U.S. economy's ability to rebound.
While many have said U.S. growth will be flat, Antunes says recent fiscal and monetary stimulus and growing export strength will allow the American economy to revive and post modest 1.6 per cent growth for the full year.
Canada will do a better than that because it has few of America's underlying problems of a housing crisis and government deficits, Antunes adds.
Canada's housing market remains steady, employment is at record levels with another 100,000 jobs created in the first three months of the year, and wages are rising.
Antunes's report notes that even in the fourth quarter, when Canada's growth pace slowed sharply to 0.8 per cent, consumer spending grew by 7.4 per cent on an annualized basis.
As well, business investment continues to post good gains, the report states.
The Conference Board is also more optimistic about Canada's economy going forward. It predicts that growth will rise to three per cent in 2009 and to 3.1 per cent in 2010, well above most other forecasts.
