Industrialized nations continue to rebalance slowly, according to Desjardins Group economists

Several major central banks bring out the big guns

LÉVIS, QC, Sept. 20, 2012 /CNW Telbec/ - According to the Desjardins Group Economic Studies team, global economic and financial issues remain sizable, while the road to greater stability is littered with obstacles. China is raising concerns, the United States fears a fiscal cliff, the euro zone is in recession, and Canada's growth drivers are weakening. "The financial markets will remain on high alert through 2013, with economic activity quite subdued," stated François Dupuis, Desjardins Group Vice-President and Chief Economist.

Canada: Growth drivers fade one by one
In Canada, the pillars for growth are dwindling. Consumer spending on goods is being slowed by the rebalancing of household budgets, while exports are being hurt by the lethargy of our trade partners. Government expenditures are declining due to the budget cuts by the federal and provincial governments. Housing construction remains strong enough to contribute to growth, but the tighter credit conditions instituted by the Department of Finance in early July should turn this trend around in the next few months. "Some slowing in this sector would be desirable to keep the housing market from undergoing a major shock, particularly in the condo segment," emphasizes Yves St-Maurice, Senior Director and Deputy Chief Economist at Desjardins Group.

Consumer spending on services, housing construction and business investment are largely responsible for the 2.0% real GDP growth forecast for Canada in 2012. While most of the other components will pick up next year, growth will be limited to 2.2%. The western provinces will lead the way, with Alberta heading the list. Despite major cuts to government spending, manufacturing production will boost Ontario's economy. The province will grow by 2.1% in 2012 and 2.0% in 2013.

Québec's economic growth has been disappointing for some time. Consumer spending has been stagnant since the start of the year under the impact of the increase in Québec sales tax last January. Other tax bites also impacted personal disposable income. When consumer spending is sluggish, it has a major impact on the economy. Consequently, the growth forecast for Québec's economy will be just 1% for 2012. On the other hand, it will rise to 1.8% in 2013, closer to the Canadian average.

Hope is now once again permitted for the euro zone
The key event of the summer was the promise from the president of the European Central Bank (ECB) to do everything necessary to preserve the euro. It is in this context that the ECB can now make unlimited purchases of bonds from countries that have asked for help from the bailout fund so as to ease the financial pressures on these countries. On the other hand, there is still a lot to do in this region to stabilize the situation.

China's economy is of increasing concern and other stimulus measures are on the menu. U.S. morale will very likely be affected by the outcome of the upcoming elections, by cuts to public spending or by tax increases that could occur in early 2013. "Given these difficulties, the global growth forecast has been lowered from 3.1% to 3.0% for 2012 and from 3.7% to 3.4% for 2013", added Mr. Dupuis.

Rate increases postponed again
Also according to Desjardins Group economists, everything suggests that the central banks will hesitate to raise their key rates for several more quarters, with most still trying to stimulate growth with increasingly bold measures. In the United States, the Federal Reserve will likely wait until mid-2015 before going into action, pushing the string of two rate increases likely to be ordered by the Bank of Canada to early 2014. Downside pressure on yields will persist in the U.S. and Canadian bond markets.

The U.S. stock market will post a return of about 13% in 2012, a result that is much better than the 3% forecast for Canada's stock market, which is being hampered by lessened enthusiasm for commodities. After this divergence in returns in 2012, the two stock indexes should climb 7% next year. "A number of factors will buoy the Canadian dollar, keeping it above parity until the end of next year", concluded Desjardins Group economists.

For more information, consult the most recent study at the following address:

About Desjardins Group

Desjardins Group is the leading cooperative financial group in Canada with assets of $194 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 5.6 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. "Best Corporate Citizen in Canada" for 2012 and among Canada's Top 100 Employers for 2012TM, Desjardins is supported by the skills of its 44,645 employees and the commitment of nearly 5,400 elected officers. A new education and cooperation program is now available to Desjardins members and the general public. For more information, visit


For further information:

Information (for journalists only):
Francine BlackBurn
Advisor, Media Relations
514-281-7000 or 1-866-866-7000, ext. 7544

François Dupuis
Vice-President and Chief Economist
514-281-7322 or 1-866-866-7000, ext. 7322

Yves St-Maurice
Senior Director and Deputy Chief Economist
514-281-7009 or 1-866-866-7000, ext. 7009

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