Canadian growth weakens in 2008, but manufacturing sector benefits from stable loonie in 2009

    OTTAWA, July 16 /CNW Telbec/ - Declining exports will limit Canada's
economic growth to just 1.7 per cent in 2008-but manufacturers can expect some
relief next year, as the Canadian dollar remains just below parity, according
to the Conference Board's Canadian Outlook - Summer 2008.
    "Over the last four years, Canada's economy has been a mix of very strong
consumer spending held back by a weak trade sector, a trend that has continued
right through the early months of 2008," said Pedro Antunes, Director,
National and Provincial Forecast.
    "Luckily for manufacturers, the loonie seems to have stopped riding the
coat-tails of rising energy prices. The Canadian dollar is expected to remain
relatively stable over 2008 and 2009, just shy of parity with the U.S.
greenback. This delinking between rising commodity prices and the value of the
loonie is a factor in the Bank of Canada's decision to stop cutting interest
    Despite healthy growth in consumer spending and employment, Canada's real
gross domestic product (GDP) registered a surprising decline in the first
quarter of 2008. A slowdown in U.S. demand for Canadian goods-especially
autos-was the major reason for the negative first quarter.
    Canadian households seemed oblivious to the troubles associated the U.S.
slowdown early in 2008, but signs of malaise in the domestic economy are
starting to appear. Employment gains are expected to slow, and new fiscal
stimulus packages-especially federal and provincial tax cuts-are drying up.
According to the Conference Board's Index of Consumer Confidence for June,
concern about high gasoline prices and the economic outlook have sharply
reduced consumer confidence.
    In the United States, the repercussions of the sub-prime mortgage
collapse, falling employment and rising inflation have sharply reduced
consumer confidence and growth in household spending. The current outlook
calls for weak growth in consumer spending over the rest of 2008 and into
2009. What will keep the economy from experiencing an outright recession is
strength in the export sector of the economy, a result of the weak U.S. dollar
and solid growth in many of the world's emerging markets. In addition,
government rebate cheques and low interest rates will ensure that consumer
spending does not drift into negative territory as has been the case in past
economic downturns.
    While modest, growth in real U.S. household spending coupled with a
stable currency will provide some relief to Canada's export sector next year.
An improving trade performance along with ongoing strength in Canada's
domestic economy should help real GDP growth accelerate to 2.7 per cent in

For further information:

For further information: Brent Dowdall, Media Relations, (613) 526-3090
ext. 448,

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