One of Canada鈥檚 top economists says investors ought to 鈥渢ake a chill pill鈥� because the country鈥檚 economic picture isn鈥檛 鈥渁s bad as you鈥檙e hearing on the streets.鈥�
CIBC World Markets Chief Economist Avery Shenfeld writes that, although growth has slowed in emerging markets like China, Russia and Brazil, and Canadian households are highly indebted, those weaknesses are now outweighed by strengths.
For example, the central Bank of Canada鈥檚 biggest trading partner, the U.S. Federal Reserve, hiked interest rates in December, indicating strength there. Shenfeld predicts another U.S. interest rate hike is coming in June.
On top of that, Shenfeld writes that Canada鈥檚 federal budget 鈥� set for March 22 -- is likely to deliver 鈥渁 larger fiscal boost than was talked about during the federal campaign.鈥�
鈥淭he Liberals had campaigned on $10-billion of stimulus which would roughly translate into a $30-billion deficit, but we鈥檙e betting on something larger as the outlook for the economy has dimmed since then.鈥�
Shenfeld added the government has 鈥渁mple fiscal room to stimulate,鈥� noting our 30 per cent federal debt to GDP ratio is far smaller than it is in the U.K., U.S. and Japan.
The report also notes that the loonie has staged a 鈥渄ecent rebound,鈥� which is 鈥渉elped by dovish Fed talk and a modest firming in crude oil.鈥�
Canada鈥檚 main stock index, the S&P/TSX, closed higher for the sixth straight session Thursday, up 105.72 points to 13,123.65. Gold and energy prices led the way.
The loonie was also up, closing at 74.65 cents U.S., nearly six cents higher than it was in January, when it hit a 13 year-low of 68.59 cents U.S.
With files from The Canadian Press
