No recession in Canada, bank economists say

Canada's economic growth will slow down this year, but will avoid a recession, top economists at Canada's biggest banks agreed Wednesday. TD Bank chief economist Don Drummond, speaking at a forum at the Economic Club of Toronto, is forecasting GDP growth of 1.9 per cent in Canada this year, while Sherry Cooper of BMO Capital Markets is calling for 2.2 per cent — the same as the Bank of Canada predicted in its last economic outlook in October. The five economists don't see a recession in the U.S. either, although some say it will be close. "We sure are not far from it and it will feel like a recession," said Cooper, chief economist at BMO, calling the decline in the U.S. housing market "without precedent." "The [U.S.] recovery is going to be very very lethargic," said Scotiabank chief economist Warren Jestin. "We're going into a recuperative period that may very well span all of the 2009 calendar." CIBC World Markets chief economist Avery Shenfeld said people shouldn't assume a U.S. recession is automatic if weak economic numbers start to emerge in the first quarter. Continue Article "We should remind ourselves that other slowdowns in the past looked like recessions, but didn't end up being so," he said. And TD's Drummond suggested that people stop with the fixation on the "r" word. "The economy's going to be weak, we've all said that," he said. "I think that's the key thing. The challenge is going to be there whether it satisfies the technical [definition of]recession or not." Merrill Lynch Canada said its own outlook calls for the Canadian economy to grow by just 1.7 per cent this year. Merrill Lynch Canada economist David Wolf is predicting the Bank of Canada will slash its key lending rate to just three per cent this year — 1.25 percentage points below where it is now. The central bank is widely expected to cut its overnight lending rate by a quarter of a percentage point at its next policy meeting on Jan. 22. Meanwhile, another major U.S. investment bank is forecasting that a U.S. recession is likely this year. "The recent data suggest that the U.S. economy is falling into recession," Goldman Sachs economists said in a research note Wednesday. But they say the recession will be "relatively mild by historical standards" and should last two or three quarters. Goldman Sachs said the U.S. Federal Reserve would end up slashing its key overnight lending rate by 1.75 percentage points to 2.5 per cent. A day earlier, a Merrill Lynch report said the U.S. economy was already in recession. But most economists are still leaning against the possibility of a U.S. recession, according to a survey by Bloomberg. The news agency polled 47 economists and found only five said the U.S. economy would contract in the next year. Canadians' pessimism grows A majority of Canadians (61 per cent) say the U.S. economy will worsen this year, a new poll suggests. Only 17 per cent see a healthier American economy, according to a Pollara survey. The weakening U.S. economy, reduced optimism about Canada's employment picture — especially in Ontario and Quebec — and fears of rising inflation have combined to make Canadians more cautious about their outlook for the coming year, the polling firm said. Half of all Canadians surveyed said they expect their household income to fall behind the cost of living this year. That's the most pessimistic personal outlook the annual survey has uncovered in its 24-year history. "This is not just a baseless prediction," said Pollara chair Michael Marzolini. "The number of Canadians who say they lost ground in 2007 has doubled [to 40 per cent] from the year before," he said. The survey's results were based on 4,589 online responses between Dec. 14 and Dec. 21. The results are considered accurate to within 1.5 percentage points, 19 times out of 20. CBC News