The financial markets' response to concerns is orderly
LÉVIS, June 20, 2011 /CNW Telbec/ - According to the Desjardins Group
Economic Studies team, economic indicators have been signalling some
weakness in a number of industrialized countries, particularly in the
United States. This should not necessarily be read as a new trend, but
rather as the combined impacts of a number of temporary coincident
factors. "Growth should firm up in the second half of the year and
continue in 2012, without being outstanding," stated François Dupuis,
Desjardins Group Vice-President and Chief Economist.
Canada cited as an example
The recovery is over in Canada and the country has entered a new
expansion phase. Despite a relatively enviable position, Canada's
economy will have to deal with a number of challenges. These include
the winding down of government stimulus plans, budget cuts, as well as
a currency whose high value is still hurting exports. Interest rate
increases in the second half of the year will also impact the real
estate market and consumption negatively. Businesses should continue to
invest, however. "Economic growth has been revised from 3.0% to 2.9%
for 2011 due to temporary weakness this spring; for 2012, growth is
maintained at 2.7%," emphasizes Yves St-Maurice, Director and Deputy
Chief Economist at Desjardins Group.
Western provinces and Newfoundland and Labrador are currently
benefitting from high oil prices. British Columbia could get a boost
towards the end of this year and in 2012 from the reconstruction
efforts in Japan. Ontario will benefit from a strong comeback by the
auto sector, even though, in the near term, the province will be hurt
by the supply problems with Japanese plants. For now, home building has
not really slowed, but it's only a matter of time. Consumption is a
little lacklustre, disrupted by the rise by gas prices and other
factors. On average, Ontario's real GDP should expand by 2.8% in 2011
and 2.5% in 2012, similar to growth for Canada as a whole.
Consumer spending did worse in Québec than in most regions in Canada
early this year, probably due to the 1% increase to the Québec sales
tax (QST) in January. However, the good labour market situation is
helping maintain consumer confidence. Québec stands out from Ontario
and the rest of Canada particularly for the weakness of its exports.
This situation is reflected in Québec's forecast growth for 2011 and
2012, at 2.2% and 2.3% respectively.
The events in Japan are muddying the waters
Global economic growth will be around 4.0% in 2011 and 2012, nowhere
near 2010's 4.7%. There is still a major dichotomy between the
performance of industrialized and emerging nations. Whereas
industrialized economies are heading for economic growth of 1.9% in
2011 and 2.5% in 2012, emerging markets will see growth of 5.9% for
these two years. The damage done by Japan's earthquake and tsunami on
March 11, and problems that have arisen at a number of nuclear power
plants have had repercussions on the global economy. A number of
industrialized nations will have their economies slowed this spring by
the collateral impacts of these recent events. However, the effects
will be temporary. The rebuilding efforts needed will have a positive
impact around the world in the second half of the year.
U.S. Real GDP growth has been revised from 2.7% to 2.5% for 2011; for
2012, growth is maintained at 3.0%. To get there, consumption will have
to firm up, and the temporary effects associated with Japan will have
to wane quickly. "The U.S. economy's structural problems, as well as
the public debt load, which is raising concern among rating agencies,
cannot be resolved without impacting economic growth," added Mr.
The central banks are not rushing to act
Despite the resurgence by inflation, most monetary authorities seem to
be considering the importance of the many risks around the world. The
main central banks are thus opting for caution, and the next key rate
increases in Canada and the United Kingdom may only come at summer's
end. The European Central Bank is more determined and should go ahead
with another rate hike in July. For its part, the Federal Reserve will
wait until next year before moving to raise its rates.
Oil prices are expected to stabilize at around US$100 a barrel for 2011,
a situation that should take some pressure off inflation over the next
few months. "The return of more sustained growth in the second half of
the year will favour the stock markets, which should deliver annual
returns of about 10% in Canada and 15% in the United States for 2011,"
concluded Mr. Dupuis.
For more information, consult the most recent study at the following
About Desjardins Group
Awarded the coveted title "Bank of the Year 2010 - Canada" by the UK
magazine The Banker, Desjardins Group is the leading cooperative financial group in Canada
and the sixth largest in the world, with assets of over $184 billion.
Drawing on the strength of its caisse network in Québec and Ontario,
and its subsidiaries across Canada, it offers a full range of financial
products and services to its 5.8 million members and clients.
Desjardins specializes in Wealth Management and Life and Health
Insurance, in Property and Casualty Insurance, in Personal Services, in
Business and Institutional Services. As one of the largest employers in
the country and one of Canada's 10 Most Admired Corporate CulturesTM of 2010, Desjardins is supported by the skills of its 42,500 employees
and the commitment of nearly 6,000 elected officers. For more
information, visit www.desjardins.com.
SOURCE DESJARDINS GROUP
For further information:
Information (for journalists only):
Advisor, Media Relations
514 281-7275 or 1 866 866-7000, ext. 7275
Vice-President and Chief Economist
514 281-7322 or 1 866 866-7000, ext. 7322
Director and Deputy Chief Economist
514 281-7009 or 1 866 866-7000, ext. 7009