Key points of the 2015 economic forecast

The Canadian dollar will weaken further, but no recession is expected for 2015

On January 21, 2015, Richter invited Jim Allworth, Chief Investment Strategist with RBC Dominion Securities, to speak at a breakfast seminar organized to present the 2015 economic forecast, in particular for Canada, the U.S., Europe and Asia. The key points of his presentation are as follows.

Although the global economy is desynchronized, things are getting back to normal

The crisis that dominated the period of 2008 to 2012 is now behind us and, in 2015, things will return to normal, dominated by a resurgence of the U.S. economy. In the past 12 months, the global economy has become somewhat desynchronized, with this being characterized by several years of faster-than-expected growth on the part of developed countries (e.g., the U.S., which has entered a catch-up phase), weaker growth in Europe and an economic slowdown in Asia.

In addition, monetary policy and interest rates are gradually normalizing. Uncertainty is fading
and investors are confident that the global economy will continue to grow.

Renewed confidence in the U.S.

The gradual recovery of U.S. markets also shows that consumers are regaining confidence. Employment is up and net household debt in the U.S. has been on the decline since 2008, although it still represented 104% of a family’s disposable income in December 2014. Moreover, due to falling oil prices a large proportion of consumer spending in 2015 will be
headed for discretionary goods, which will have an exponential impact on the global economy. 

Weak Canadian dollar and growing demand for Canadian manufactured goods

Canada is entering a phase of relative growth. A weak Canadian dollar coupled with stronger U.S. demand for automobiles and forest products is boosting sales of U.S. manufactured goods, thereby contributing to the recovery of the Canadian manufacturing sector. This increased demand for manufactured goods is having a positive impact on employment and Canadian employment figures should continue to improve in 2015.

There should be a gradual return to inflation in Canada and interest rates can be expected to normalize accordingly.

Finally, although the Canadian dollar will continue its slide, Mr. Allworth believes that neither Canada nor the U.S. is expected to go into recession in 2015.

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