Economists at Canada’s largest bank have reduced their expectations for economic growth, while saying the domestic economy “remains firm.”
The Royal Bank of Canada now projects national growth this year of 0.9 per cent, down from its previous prediction of 1.4 per cent.
It cites “the persistent turmoil in financial markets and disappointing economic trends over the past two quarters.”
For 2009, the report released Wednesday sees a modest revival in gross domestic product with a growth rate of 1.5 per cent.
“The continued weakness in the U.S. economy is expected to dampen growth in Canada,” said Craig Wright, RBC’s chief economist.
“However, this pressure on our growth will be tempered by strong commodity prices which are contributing to robust export revenues and providing support to Canadian domestic spending via a boost to incomes.”
The report notes that Canada’s housing market “is showing signs of coming off the boil” after almost a decade of high activity.
“However, any weakening is expected to be more moderate compared to the U.S. experience as Canadian mortgage markets did not see the excesses that afflicted the U.S. housing sector,” RBC says.
It also notes “fatigue” in Canada’s labour market, with net job gains of only 87,000 in the first eight months of this year, after 320,000 new positions on average each year from 2002 to 2007.