National Bank of Canada Eco. & Strat. Team
National Bank of Canada
Highlights
While stagnation in the eurozone and rebalancing policies in China will again restrain the global economy in 2015, growth should nonetheless be well supported thanks to a triple boost in the form of improving U.S. demand, a stronger U.S. dollar, and lower oil prices, all of which bode well for emerging economies. Moreover, low inflation will allow central banks in most major economies to assist growth by keeping monetary policy highly accommodative. We expect global GDP growth to accelerate to 3.5% in 2015.
The U.S. is once again regarded as a beacon of hope for the global economy. Notwithstanding softness in some areas, notably in the housing market, the world’s largest economy is on a clear uptrend, buoyed by an invigorated private sector. The labour market has taken off and the resulting increased household income, coupled with cheap gasoline and re-leveraging, should boost consumption further. Exports could soften a bit due to the stronger dollar, although neither this nor a slight tightening of monetary policy by the Fed will prevent U.S. GDP growth from accelerating to 3% in 2015, the best performance in a decade. That, of course, assumes business confidence isn’t sapped by a dysfunctional Congress.
The oil price slump prompted a three-tick downward revision to our 2015 GDP growth forecast for Canada to just 2.2%. The curtailment of investment in the oil patch and spending restraint particularly by provinces due to the revenue shortfall will offset the benefits of cheaper energy for consumers and non-energy producers. The housing market could also moderate a bit after defying gravity for so long. So, domestic demand will remain soft for yet another year, leaving trade to once again lead the way, buoyed by a cheaper currency and strengthening U.S. demand. Another year of above potential growth will close the output gap and keep the annual core inflation rate above the Bank of Canada’s target. But given its concerns about the global economy and domestic risks, the central bank will likely delay rate hikes to 2016.
This presentation may contain certain forward-looking statements about the 2009 Economic and Financial Outlook. Such statements are subject to risk and uncertainties. Actual results may differ materially due to a variety of factors, including legislative or regulatory developments, competition, technological change and economic conditions in Canada, North America or internationally. These and other factors should be considered carefully and readers should not rely unduly on National Bank of Canada’s forward-looking statements. This presentation may not be reproduced in whole or in part, or further distributed or published or referred to in any manner whatsoever, nor may the information, opinions or conclusions contained in it be referred to without in each case the prior express consent of National Bank.
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