Economy expected to rebound: Royal
OTTAWA—The Canadian economy is expected to pick up in the third quarter as rebuilding of flood damaged areas in Alberta and the end of a construction workers’ strike in Quebec are expected to boost growth, according to the Royal Bank.
Despite the improvement, however, Royal Bank chief economist Craig Wright said business investment spending and exports are expected to remain hesitant.
The updated outlook by the Royal Bank puts the economy growing at 3.4 percent for the third quarter, compared with a forecast in June for a gain of 2.9 percent.
The bump up comes after a second quarter that was weaker than expected with growth at 1.7 percent—held back by a number of one-time factors, including the flooding in Alberta and the Quebec construction strike.
The Royal Bank had expected the second quarter to come in at 2.1 percent.
“It is just a shuffling from one quarter to the next of some of these special factors,” Wright noted.
On the positive side, he said the housing market has been stronger than expected.
The Canadian Real Estate Association raised its 2013 outlook for homes sales yesterday and reported an 11.1 percent jump in August sales compared with a year ago.
“But going forward, we expect that to pull back,” Wright warned.
The Royal Bank outlook predicted the global economy is headed for stronger growth in the second half of the year, helped by improvements in Europe and the United States.
The report suggested that if the trend continues, 2014 may see the world’s advanced economies drive global growth more than the emerging economies.
The more positive outlook comes as worries about a new financial crisis in Europe and a hard landing for the Chinese economy recede while fears about the U.S. slipping back into a recession diminish.
However, Wright said those risks have been replaced by others, including the ongoing conflict in Syria and the upcoming debates in the U.S. over its debt ceiling.
The uncertainty is holding back investment, he noted.