The Canadian economy is coming off a “sugar high” and will face four impediments that will slow growth going forward.
1. A weaker U.S. economy
2. Softness in Canadian housing
3. Fatigued consumers and
4. Fading stimulus will all conspire to limit growth to the 1.5% to 2.2% range
U.S employers have been slow to add to payrolls, and that’s creating a pall over consumers — as well as slowing the housing market’s recovery, the TD report said. That means sluggish economic growth, which will affect Canadian sectors like auto and lumber as demand remains weak.
Canadian consumers are already among some of the highest leveraged households in the world, and that doesn’t bode well for the housing market, existing home sales will feel a sharp pinch, hitting a trough of 320,000 units by mid-2011 — a far cry from 2009’s near-record high of 465,000 units.
TD’s report states that household indebtedness has been on what it calls a “sharp and unsustainable climb” over the past few years. Debt-to-person disposable income is now at 144% in Canada, close to the U.S.’s 151%. Four years ago, the gap was 30%.
On top of the strain from indebted consumers and a weak U.S. economy, the government is starting to turn off the stimulus tap, slowing the economy even further.
But it’s not all bad news.
“Fortunately, Canada faces a lesser near-term need than other countries for radical fiscal austerity.
Courtesy of the financialpost
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1. Have you noticed any indications of a slowing economy?
2. Do you think, the economy will pick up by the time you graduate?
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