More promising U.S. outlook in 2014 is good for Canada, if Washington
can finally overcome gridlock
OTTAWA, Oct. 21, 2013 /CNW/ - The U.S. economy was already struggling in
2013, and the federal government shutdown will mean that real gross
domestic product will grow by 1.6 per cent at most this year, according
to The Conference Board of Canada's U.S. Outlook-Autumn 2013.
• Better growth is expected next year if domestic and international risks
to the outlook can be avoided.
• The U.S. fiscal deficit is actually declining, due to previous spending
cuts and tax increases.
• Housing starts are expected to rise by almost 20 per cent this year and
by 26 per cent in 2014.
Led by improvement in the housing market and investment spending, real
GDP growth is forecast to reach 3.2 per cent in 2014, but both domestic
and international risks remain.
"Although the U.S. Congress avoided a default last week, the agreement
is a stop-gap measure that failed to solve the basic differences
between Democrats and Republicans over taxes and government spending,"
said Kip Beckman, Principal Economist. "If we go through the same drama in January and
February, our projection for stronger growth next year would be in
"Our optimistic outlook for 2014 is also contingent on the ongoing
turmoil in the Middle East remaining largely contained, so that oil
prices do not spike."
While recent developments in Washington have focused on the deficit and
debt situation, the fiscal outlook for the United States is actually
improving in the short term. From $1 trillion in 2012, the fiscal
deficit is set to decline to $750 billion in 2013 and $563 billion in
The October agreement to reopen the federal government avoided
potentially sharp losses in equity markets that could have shaken
business and household confidence. However, the volatility in financial
markets could return in 2014 if the poisonous atmosphere in Washington
continues over tax increases and entitlement programs.
The higher taxes and lower spending implemented in early 2013
contributed to the weak U.S. economic growth this year. Real household
spending is set to increase by a modest 2 per cent this year before
rebounding and growing by 3.1 per cent in 2014.
Next year, fiscal restraint measures are expected to ease, and real
household spending is set to increase by 3.1 per cent in 2014.
Government spending is also expected to make a slight positive
contribution to economic growth in the second half of next year.
Furthermore, the U.S. housing market is recovering, which is good news
for Canadian exporters. Housing starts are expected to increase by
close to 19 per cent this year and by 26 per cent in 2014. Real
spending on residential construction is expected to expand by 29.4 per
cent in 2014.
SOURCE: Conference Board of Canada
For further information:
Brent Dowdall, Media Relations, Tel.: 613- 526-3090 ext. 448
Link to publication: http://www.conferenceboard.ca/e-library/abstract.aspx?did=5833