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TD Bank raises Q3 outlook for economic growth

Bank expects Canada's economy to grow at a pace of 2.3% in the July-September period.


TORONTO – TD Bank has raised its outlook for Canadian economic growth for the third quarter and says consumer spending will be the driving force – not exports and business spending, as it had thought earlier.

In a quarterly update to its economic forecast, the bank said it expects Canada’s economy to grow at an annual pace of 2.3% in the July-September period, compared with a June forecast for growth of 2%.

TD still expects full-year growth will be 1.7% in 2013 and 2.4% in 2014.

“Economists in Canada are guilty of sounding like broken records, repeating the need for Canada’s growth to shift from relying on heavily indebted consumers to stronger exports and business investment,” the bank said in its report. “While the process has started, US economic growth looks slightly softer in the near term making the transition uneven. In the meantime, the consumer and the housing market have shown more momentum, helping to keep the economy puffing along.”

The US economy faces several challenges in the coming months including another congressional showdown over the federal government’s budget and borrowing.

A near-term issue is a temporary spending bill required to keep the US government fully open after the start of the new budget year. The government also reaches its borrowing limit, or debt ceiling, early in October.

In addition, the US Federal Reserve has moved to delay its plan to start withdrawing some economic stimulus until it sees further confirmation of improvements in the economy.

However, TD noted that interest rates in the US have been rising and they will act as a headwind to growth.

TD has reduced its US economic growth forecast for all of 2013 to 1.6% and 2.6% in 2014, compared with its June forecast for growth of 1.9% for this year and 2.8% next year.

The Canadian economy grew by 1.7% in the second quarter as flooding in Alberta and a construction strike in Quebec took their toll and most economists expect some bounce back in the third quarter.

©The Canadian Press