The financial markets work on their patience
LÉVIS, QC, Dec. 20, 2012 /CNW Telbec/ - According to the Desjardins Group Economic Studies team, international financial markets are still sensitive to any unexpected
event. The relative equilibrium that had materialized over the last few
months proved quite fragile. "The fiscal cliff saga in the United
States should wrap up soon, removing a major source of uncertainty. The
extent of the impact on North America's economy and the reaction from
the markets will depend on the outcome," stated François Dupuis,
Desjardins Group Vice-President and Chief Economist.
Canada losing steam
Canada's economy is increasingly feeling the impact of the weakness in
global demand and movement by exports provides firm evidence of this
trend. What's more, we have a public sector that is in austerity mode
and a housing market that is going into a slowdown. Employment's good
performance could have positive impacts on household income and
consumption, despite their high debt loads. "Businesses should continue
to invest to deal with low productivity, but some could also lose
enthusiasm as a result of weak demand for their products,"
emphasizes Yves St-Maurice, Senior Director and Deputy Chief Economist
at Desjardins Group.
The current environment is less favourable to Canada's economy. Canada's
real GDP should rise by 2.0% in 2012 and 1.8% in 2013, and then close
in on potential in 2014 with growth of 2.5%. Commodities, especially
oil, remain a major driver for Canada's economy, largely explaining the
regional disparities. Western provinces will once again be the best
performers in 2013 and 2014. They will get a boost from a WTI (West
Texas Intermediate) price that should be US$96/barrel and US$104/barrel
at the end of 2013 and 2014 respectively.
The context in Quebec and Ontario will remain tough, as these provinces
do not benefit as much from the presence of energy commodities. Their
manufacturing sectors, heavily focused on international merchandise
trade, will continue to hurt for a few more quarters due to negative
impacts of the U.S. fiscal cliff and the recession in the euro zone.
The Canadian dollar will gradually undergo upside pressures and could
hit US$1.05 towards the end of 2014. On the other hand, the loonie's
relative strength should encourage businesses to keep investing to
improve sometimes lacklustre productivity.
In Quebec, we can expect real GDP to grow by 1.4% in 2013. Ontario
should feel the backlash from the big surge in automotive production in
2012, showing real GDP growth of just 1.7% in 2013. Both provinces will
also be affected by the slowing real estate market, governments'
planned spending cuts, and repairs to household balance sheets.
Economic growth will climb to 2.2% in Quebec and to 2.3 % in Ontario in
2014, helped by the global recovery, especially in the United States.
Longer than expected in Europe
The recession will persist longer than forecast in the euro zone,
although it will remain fairly slight. The euro zone will only return
to positive growth in 2014, with real GDP growth forecast to be 0.6%.
2013 should see a 0.4% contraction. Concerns about China's economy have
somewhat eased because the latest indicators are showing slight signs
of an upswing. With real GDP growth of 5.1% in 2013 compared with 4.6%
in 2012, emerging nations will allow the global economy to post
slightly higher growth in 2013, at 3.3%.
Unsurprisingly, issues surrounding the fiscal cliff and the debt ceiling
are monopolizing the attention in the United States. The tension could
rise as the end of the year closes in. After rising 2.2% in 2012, the
U.S. economy's growth could retreat to 2.0% in 2013, attenuated by the
outcome of the current negotiations. "Growth should accelerate
subsequently, going to 2.8% in 2014, boosted by a recovery by the real
estate market, consumption and business investment", added Mr. Dupuis.
Reason to hope for further good stock market returns
North America's stock markets should benefit from a better situation in
mid-2013 and 2014. The returns will be better than those expected from
the bond market, with its more limited potential for appreciation.
Failing a solid economic recovery and due to the elevated risks of a
skid, central banks will continue to be expansionary. "The Bank of
Canada will also make sure the recovery is well underway before it goes
into action, and this should not be confirmed until mid-2014",
concluded Desjardins Group economists.
For more information, consult the most recent study at the following
About Desjardins Group
Desjardins Group is the leading cooperative financial group in Canada with assets of
nearly $200 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, 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 www.desjardins.com/co-opme.
Image with caption: "Summary of the economic forecasts (CNW Group/DESJARDINS GROUP)". Image available at: http://photos.newswire.ca/images/download/20121220_C2505_PHOTO_EN_22165.jpg
SOURCE: DESJARDINS GROUP
For further information:
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514-281-7322 or 1-866-866-7000, ext. 7322
Senior Director and Deputy Chief Economist
514-281-7009 or 1-866-866-7000, ext. 7009