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This article was published 1/8/2012 (1820 days ago), so information in it may no longer be current.
OTTAWA -- Canadians are in for at least two more years of slowing economic activity and low job creation, a condition that should keep interest rates low until 2014, says the Bank of Nova Scotia.
In a new forecast, Scotiabank economists Derek Holt and Dov Zigler estimate the economy will likely average 1.9 per cent growth this year and 1.8 in 2013. The forecast is slightly below consensus, and well south of the Bank of Canada's recently revised projections of 2.1 and 2.3 per cent growth in 2012 and 2013.
The forecast comes on the same day a Conference Board report suggests Canada's labour market has run out of gas and could even register a loss of jobs for the month of July.
Scotiabank's take on the economy also follows this week's disappointing gross domestic product performance in the month of May, a 0.1 per cent gain that suggests second-quarter growth will be below two per cent.
At such a slow pace of expansion, the spare capacity in the economy will actually increase over the next two years, rather than be fully eliminated by the end of next year, as the Bank of Canada projected last month.
"At best, we're going to see a very slow-growth environment with downside risks," said Holt, Scotiabank's vice-president of economics.
He added most developed countries will be in the same boat, with strong growth coming mostly from emerging economies such as China, India and Indonesia. This should keep the Bank of Canada on hold at the current policy interest rate setting into 2014, the report said, although governor Mark Carney has maintained a tightening bias, meaning he is signalling a rate hike in the future.
That will be difficult, said Holt, given many global central bankers are easing lending conditions. Any counteraction from Canada will light a spark under the dollar, further weakening exports.
South of the border, the U.S. Federal Reserve said Wednesday the American economy is losing strength and repeated a pledge to take further steps to stimulate growth if the job market doesn't show sustained improvement.
Also Wednesday, the Conference Board reported its help-wanted index fell 4.5 points to 120.5 in June, a reading suggesting only modest job gains in the near term. The Ottawa-based think-tank predicts July's employment report from Statistics Canada, which will be released next Friday, will show a loss of 5,500 jobs, marking the first setback since February.
After two strong months of job creation in March and April, the last two months have seen only moderate growth, both under 8,000 jobs.
"This is not surprising, as the uncertainties created by the debt crisis in Europe and a potential slowdown in China and the U.S. are leading Canadian employers to adopt a cautious pace of hiring," the Conference Board said.
-- The Canadian Press