Economy poised for growth above four per cent, says Bank of Canada
LONDON, Ont. (CP) - The economy is showing signs of recovery and should grow by more than four per cent in the final quarter of this year, the governor of the Bank of Canada said Monday.
Consumer spending and business investment are healthy while export demand should soon increase, thanks to a boom in the United States economy, David Dodge told the London Chamber of Commerce. "All told, the Canadian economy should be poised for solid growth ahead, beginning in the fourth quarter."
The Canadian Dollar was lifted by selling pressure on the U.S. greenback and new Canadian data indicating a robust housing sector.
The dollar has jumped by about 20 per cent in value this year, from under 64 cents US to well above 76 cents US by the end of last week - "an unprecedented movement."
Because the impact of the soaring currency is unclear, Dodge left the door open for an interest rate cut next year if the loonie continues to soar, adding he would be closely watching future economic data.
His confidence in an imminent recovery kept Dodge from lowering the Bank of Canada's key policy interest rate last week from its current level of 2.75 per cent.
Part of the reason the dollar has gained strength this year is the wide spread between Canada's 2.75 per cent policy rate and a one per cent interest rate set by the U.S. Federal Reserve.
Dodge brushed off dismal GDP numbers that showed a mere 1.1 per cent expansion in the third quarter.
The figure was depressed because businesses were drawing down inventories instead of producing new goods. That inventory reduction should now be finished, he added.
Dodge also used his speech to warn that Canadians must become more productive to expand the economy and their own standards of living.
Otherwise, the country won't be able to deal with an aging population that will lead to a smaller workforce in about 15 years, he warned.
Canada must also work to lower its level of public debt in relation to GDP, again to free money for social programs to support an aging population.