Winnipeg Free Press - PRINT EDITION

Experts see modest but solid growth for Canada's economy

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OTTAWA -- Wait until next year.

It's a familiar refrain for sports teams, but the premise is getting old for Canadians awaiting the return of an economy that can be counted on for jobs, solid incomes and financial security.

As far back as 2010, the Bank of Canada held out the prospect of better times in the year ahead. But unexpected events -- whether it was a tsunami in Japan, a debt crisis in Europe, or political shenanigans in Washington -- always took the shine off the optimism.

Craig Alexander, TD Bank's chief economist says we're still waiting for a hand-off from consumer-driven growth.

"We are going to eventually get this rotation toward exports and business investment and away from real estate and consumer spending. We said that would happen in 2013. It didn't happen. Now we're saying it is going to start (in 2014)," Alexander said.

TD, like the Bank of Canada and a consensus of economists, is estimating growth will rebound to about 2.3 per cent in 2014. That would follow two years of sub-par growth at 1.7 per cent in 2012 and an estimated 1.7 per cent growth this year.

The improvement foreseen for 2014 is not much of a bump and won't lead to massive job creation and steep income growth. But the difference between 1.7 per cent and 2.3 per cent is important.

The Bank of Canada believes economy has the "potential" to grow about two per cent. At 1.7 per cent, the economy has underachieved its potential whereas, at 2.3 per cent, the economy can eliminate slack and head toward full recovery.

The central bank predicts 2015 will see the gap close further with 2.6 per cent growth, enabling the economy to return to health by the middle or the end of that year.

The other important distinction is the composition of growth.

The central bank and others say 2014 will be the year the economy enters the zone of what Bank of Canada governor Stephen Poloz calls self-generating, self-sustaining "natural growth."

"Unless you are sure the product demand is going to be there, it's hard to trigger a boom in capital spending. So a brighter global economy could see a return in capital spending in the resource sector, which is part of that rotation that's been missing," he said.


-- The Canadian Press

Republished from the Winnipeg Free Press print edition January 2, 2014 A15

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