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Real economic growth in the United States is expected to slow to 1.2% in 2001, following growth of about 4.0% annually from 1997 to 2000. This slowdown is primarily due to weaknesses in the manufacturing and IT sectors and a correction in equity markets made worse by the September 11 terrorist attacks. The US airline system and financial markets, for example, were shut down during the week of the attack and activity in the tourism industry slowed considerably. The US economy contracted by 0.4% in the third quarter and most economic forecasters now anticipate a recession in the last two quarters of this year. In response to the economic slowdown, the US Federal Reserve has reduced the federal funds target rate this year by 4.0 percentage points to 2.0%, its lowest level since the 1960s.
US economic growth is expected to be marginal in the first two quarters of 2002 and average 1.4% for the year. Growth will be aided by low interest rates, higher public sector expenditures, personal income tax reductions, and increased construction activity. However, consumer spending, which accounts for over 60% of the US economy, is not expected to provide a short term stimulus to recovery—consumer confidence levels are at an eight year low.
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Source: Conference Board of Canada, October 2001 |
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2000 |
2001f |
2002f |
| World |
4.0 |
1.4 |
2.0 |
| Canada |
4.4 |
1.5 |
1.2 |
| United States |
4.1 |
1.2 |
1.4 |
| Japan |
1.5 |
-1.2 |
-0.7 |
| European Union |
3.5 |
1.7 |
2.0 |
| Newfoundland* |
5.6 |
1.2 |
4.5 |
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f: forecast. Source: Various, available upon request.
*2000 - Statistics Canada; 2001 - Economics and Statistics
Branch, Department of Finance; 2002 - Private Sector Average
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Real economic growth in Canada is expected to be 1.5% in 2001. Like the US, growth will be weak relative to the 1997-2000 period. Economic forecasts are mixed with respect to a recession during the last two quarters. While at this time most forecasters believe the economy will contract in the last quarter, they are uncertain about economic performance in the third quarter. This uncertainty is reflected in a depreciating Canadian currency which fell from 66.83 cents against the US dollar at the start of the year to 62.57 cents on November 8. The Bank of Canada has been moving to avert a recession by lowering interest rates. Thus far in 2001, the Bank has lowered its key overnight lending rate by 3.0 percentage points to 2.75%.
Canadian employment is expected to grow by about 1.0% in 2001, compared to 2.6% in 2000. The unemployment rate should average 7.2%, up from 6.8% last year. Real disposable income is expected to grow by 2.6%, thanks to strong wage gains, low inflation, and personal income tax reductions.
Canada is expected to post real economic growth of 1.2% in 2002. Growth is expected to be weak in the first half but strengthen in the third and fourth
quarters.
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Which web sites are used by economic analysts for the latest
information on the Canadian and global economies?
Visit: www.economics.gov.nl.ca/mnLinks.asp |
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