Canadian recovery to be modest: BoC

| Friday, 1 October 2010



The Canadian recovery is expected to be modest and uneven as the global economy enters into “a new phase of unusual uncertainty,” Bank of Canada Governor Mark Carney told the Windsor-Essex Chamber of Commerce on Sept. 30.

“As a result of the combination of the scale and speed of the policy response and our well-functioning financial system, Canada’s economy is now back at its pre-crisis peak in output,” Carney said. But he added that the recovery remains modest compared to previous economic rebounds and has relied heavily on housing and personal consumption.

The economic output of real estate agents and brokers dropped eight per cent in July, while real gross domestic product dropped for the first time in 11 months by 0.1 per cent, according to a report released by Statistics Canada today.

“The limitations of this reliance are becoming evident,” Carney noted. “In recent months, the speed of the recovery has diminished. A modest pace of growth can be expected in coming months as our economy faces considerable headwinds from both the external sector and the limits of household balance sheets.”

While the housing market is cooling, mortgage rates remain low and it looks as though the Bank of Canada is “close to finishing its tightening for this year,” Ted Tsiakopoulos, Canada Mortgage and Housing Corporation Ontario regional economist, told CRE Online.

“This is good news for housing in that affordability will likely improve through the fourth quarter of this year into the earlier portion of next year. But I think economic growth is going to slow down in the months ahead. So there’s a minus behind that but there are also some pluses in that interests rates will be a lot lower than what we thought through 2011.”