Economic data in some parts of the world may have been a bit better than expected lately, but they were not good. The fact remains that global growth is fragile due to the extension of the European recession and sub-2% North American growth while emerging markets, the beacon of hope for the global economy, continue to sputter as trade activity is curtailed by weak demand in the OECD.
Global economic weakness and domestic uncertainty continue to weigh on U.S. growth. Assuming the Congress elected in November acts decisively and responsibly to address the fiscal cliff, U.S. growth is likely to pick up next year buoyed by a housing market that’s now on the ascendancy, more vigorous consumption helped by a lighter debt burden for households, and a potential comeback of business investment spending as uncertainty dissipates.
The anaemic global economy is hammering Canada’s exporters, while the domestic economy is being restrained by a moderation in investment spending and a housing market that’s lost its sheen. This triple whammy is not just a Q3 story. It will keep Canadian growth below potential for longer than what the Bank of Canada is expecting, likely delaying BoC rate hikes to 2014.