Good Economic News -- And Some Not So Good
In fact, says Scotiabank's chief economist, Warren Jestin, "it will be difficult for consumers to pull the economy back into high gear this year for the simple reason that they haven't stopped shopping.
"Lingering excess capacity and profit pressures across a range of industries also will keep capital spending at a relatively low ebb in most industrial nations and will constrain the pace of recovery in global exports."
Writing in the bank's flagship report, Global Outlook, Jestin says "Industrial production, though still nearly 5 per cent below a year earlier in the opening months of 2002, has begun to strengthen in all nations except the U.K."
But while the U.S. and Canada began the year with quarterly growth approaching an annual 6 per cent, "by the summer...the explosive run-up in U.S. car and home sales is expected to cool.
"On balance, growth is expected to average around 3 per cent in both nations this year and next."
Meanwhile, the Bank of Canada has warned that it will gradually reverse the two-percentage-point decline in interest rates that took place after the Sept. 11 terror attacks in New York.
Canada continues to be competitive in this climate, Jestin says, primarily because of smaller wage increases and a weaker currency.
But to maintain its market-place edge, Ottawa must "fast-track private and public sector investment initiatives designed to nurture the upgrading of our nation's productive capacity".
Regionally, Alberta will lead provincial growth in after-tax household income and pre-tax profits this year, while prospects are also bright in Atlantic Canada, with offshore oil and natural gas expected to fuel growth.
In Ontario and Quebec, Jestin says, pent-up consumer demand and solid employment gains "will reinforce the impetus from exports as the dominant U.S. market regains momentum".
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