A new report from RBC Economics says strong domestic demand and increased job creation will continue Canada's robust economic rebound, as the global economy bounces back from the European debt crisis.

The bank's latest Economic Outlook report, released Thursday, calls for real GDP growth of 3.6 per cent this year, after Canada's first-quarter growth surged to 6.1 per cent, the fastest pace in over a decade.

“Canada's economy continued to surge ahead as domestic demand was backed by increases in consumer, housing and government spending,” said Craig Wright, the bank's chief economist.

“Looking ahead, positive signs in the job market indicate that the recovery will continue in the near term, as private investment increases following a sharp decline during the recession and core inflation remains on target.”

The bank says the economy will continue to show gradual improvement as businesses rebuild inventories following a sharp reduction during the recession.

Royal Bank of Canada (RY-T52.850.821.58%) revised its unemployment rate outlook to eight per cent for 2010 and to 7.3 per cent in 2011, down from its previous call for 8.4 per cent and 7.7 per cent respectively.

The bank also revised its forecast for GDP growth in 2011 to 3.5 per cent, down from its previous call of 3.9 per cent growth.

“Stronger-than-expected economic data and higher inflation have reduced the need for emergency low interest rates, although uncertainty arising from the European debt crisis adds an element of caution to further rate increases,” added Mr. Wright.



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