Canada to benefit from a strengthening U.S. economy in 2014: RBC

After another year of mediocre growth, Canada's economy is expected to perk up in 2014, supported by a pick-up in exports and strengthening business investment, according to the latest Economic and Financial Market Outlook issued today by RBC Economics. RBC is forecasting real GDP growth of 1.7 per cent in 2013, 2.6 per cent in 2014 and 2.7 per cent in 2015…

The report indicates that strong exports relative to imports in 2014 will result in trade contributing more than it has in a decade to Canada's annual growth rate. RBC anticipates that this will cause a rebound in investment activity particularly in the manufacturing and mining and oil and gas sectors.

Extra support to external trade will come from a weakening Canadian dollar over the course of next year, says RBC. ..

RBC also assumes that neither the Bank of Canada nor the Fed is likely to adjust the overnight policy rate in 2014, meaning short-term interest rate spreads will hold steady. ..

Canada's labour market has been resilient with 148,000 jobs created so far in 2013 and the unemployment rate falling to a cycle low of 6.9 per cent, RBC says. This increase in employment has driven up wages by close to 2.0 per cent on average so far this year while inflation has only increased at an average 0.9 per cent pace. As labour markets tighten further, wage pressures are expected to have a greater upward impact on inflation through the forecast moving it closer to the Bank of Canada's 2.0 per cent target rate. RBC notes that real wage gains will continue to fuel consumer spending going forward…

On the provincial front, RBC says that an improvement in underperforming provincial economies will be reflected in Canada's real GDP growth rising in 2014. The country will continue to see the West out-performing the East with the dividing line shifting slightly east to the Ontario-Quebec border.

This has been excerpted from the 12 December  2013 article by CNW Group, and is available in its entirety at