The global economic slump heightens impatience with the euro zone, according to Desjardins Group economists

Investors attempt to protect their assets

LÉVIS, QC, June 21, 2012 /CNW Telbec/ - According to the Desjardins Group Economic Studies team, the euro zone is still mobilizing a lot of energy. Uncertainty about the ability of political and financial authorities to resolve an unending crisis is spreading to the world. "It would be overly optimistic to think that the global problems of public and private debt will be resolved quickly. Patience is in order," stated François Dupuis, Desjardins Group Vice-President and Chief Economist.

Investment remains healthy in Canada
Canada's economy should grow by 2.1% in 2012 and 2.4% in 2013. Canada has a considerable asset: it has major commodity reserves that are benefiting from sustained global demand. This enthusiasm allowed non-residential investment to post a ninth straight quarter of growth in early 2012. Unlike most industrialized countries, Canada's housing market maintains a good pace of growth. "These two sectors that are supporting the Canadian economy are also those that carry the greatest risks," emphasizes Yves St-Maurice, Senior Director and Deputy Chief Economist at Desjardins Group.

The fight against deficits continues in Canada and the provinces, with the result that government spending will grow slowly. The trade balance will remain the Canadian economy's weak link, as exports are not rising enough to offset the heavy imports required by business investment. The Canadian dollar's temporary pullback to around US$0.97 is one factor in exporters' favour, but, if global financial market tensions ease, the loonie will quickly return to parity.

Forecast growth for Québec remains at 1.4% for 2012 and 2.0% for 2013. The upswing in employment has helped attenuate fears of greater deterioration in the economy. Ontario's real GDP growth should come in at 1.8% for 2012 and 2.1% for 2013. In this province, concern is primarily focused on the booming Toronto condo market. As for the Western provinces, they will all post growth above 2.0% in 2012. Alberta will head the pack driven by energy sector investments, with growth of 3.5% in 2012 and 2013.

The euro zone is a heavy drag on the global economy
The forecast for global growth is established at 3.1% for 2012 and 3.7% for 2013. Emerging nations will see their real GDP growth slow, from 5.7% in 2011 to 4.8% this year, then regain some momentum in 2013, reaching 5.5%. Europe's economic environment remains difficult. Countries in the euro zone are struggling under the burden of the austerity programs needed to clean up their public finances. At over 50%, the jobless rate for youth in Spain and Greece is seen as a national catastrophe, and the situation could deteriorate further. The euro zone's real GDP will contract by 0.5% this year, followed by a 0.7% recovery next year.

The United States has still not managed to find solid support to accelerate its moderate growth. The weak pace of job creation is the best evidence. An economy that is 70% dependent on consumption of goods and services and that create so few jobs cannot perform well. "Add to this the ongoing imbalance in the housing market, exports hampered by an unfavourable global economy, and unconvincing growth in business investment, and the U.S. economy will have a hard time posting growth better than the 2.1% forecast for 2012 and 2013", added Mr. Dupuis.

The downside pressure on interest rates continues
This economic environment is encouraging central banks to keep their policy rates extremely low. The Federal Reserve should wait until late 2014 before it starts to raise its Federal Funds rate, but until then, it could introduce further stimulus measures. In this context, the Bank of Canada should wait until the fall of 2013 to raise its overnight rate, despite its concerns about the housing market and consumer debt loads.

Ongoing global financial market tensions will keep downside pressure on U.S. and Canadian bond yields. The flight of capital to safe-haven securities will limit potential gains of more risky investment vehicles. "Oil prices should hit an average of US$94 a barrel this year, and US$96 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 $196.4 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. As one of the largest employers in the country 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:

(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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