TORONTO — A new report from RBC Economics says strong domestic demand and increased job creation will continue Canada’s robust economic rebound, as the global economy bounces back from the European debt crisis.
The bank’s latest Economic Outlook report, released Thursday, calls for real GDP growth of 3.6 per cent this year, after Canada’s first-quarter growth surged to 6.1 per cent, the fastest pace in over a decade.
“Canada’s economy continued to surge ahead as domestic demand was backed by increases in consumer, housing and government spending,” said Craig Wright, the bank’s chief economist.
“Looking ahead, positive signs in the job market indicate that the recovery will continue in the near term, as private investment increases following a sharp decline during the recession and core inflation remains on target.”
The bank says the economy will continue to show gradual improvement as businesses rebuild inventories following a sharp reduction during the recession.
RBC revised its unemployment rate outlook to eight per cent for 2010 and to 7.3 per cent in 2011, down from its previous call for 8.4 per cent and 7.7 per cent respectively.
The bank also revised its forecast for GDP growth in 2011 to 3.5 per cent, down from its previous call of 3.9 per cent growth.
“Stronger-than-expected economic data and higher inflation have reduced the need for emergency low interest rates, although uncertainty arising from the European debt crisis adds an element of caution to further rate increases,” added Wright.
The report indicates that the global economic recovery remains on track despite recent volatility caused by the European debt crisis.
It’s world growth forecasts have been revised higher in 2010, as the European bailout package eased some concerns about the region.
Eurozone GDP growth is forecasted to be 0.8 per cent in 2010 and 1.7 per cent in 2011 and U.S. GDP to increase by 3.1 per cent in 2010 and 3.4 per cent in 2011.
The report also projects the loonie will rebound and sit closer parity with the greenback as fears over European crisis ease throughout the summer and fall.
The report calls for Newfoundland and Labrador to lead the provinces with 4.1 per cent growth, followed by Saskatchewan at 3.8 per cent, and Ontario and B.C. at 3.5 per cent each.
Growth in Alberta will rise 3.1 per cent this year but strengthen to 4.2 per cent in 2011, the second highest rate of growth behind Saskatchewan at 4.4 per cent.